^ 


kfi 


THE  LIBRARY 
OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 


3<; 


The    Law  of 
Bills,  Notes  and  Checks 


Being 

The  full  text  of  the  Negotiable  Instruments  Law  as 

adopted  by  forty-four  states,  the  District 

of  Columbia  and  Hawaii 


WITH   COPIOUS    ANNOTJTIONS, 
FORMS  iff  ILLUSTRATIONS 


By  JAMES  L.  WHITLEY 

of  the  New  York  Bar,  former  Assistant   Corporation  Counsel  of  City  0/ 

Rochester,  Member  of  Committee  on  Banks,  New  York  State 

Legislature  and  author  of  Police  Officers  Law 


ROCHESTER,  N.  Y. 

NATIONAL  LAW  BOOK  COMPANY 

I9I7 


i9n 


Copyright  19 17 

by 

James  L.  Whitlett 


John  P.  Smith  Printing  Company- 
Rochester,  N.  Y. 
1917 


PREFACE 

The  object  designed  for  the  following  volume  is  to  guard  those  dealing 
with  commercial  paper  and  point  out  the  dangerous  spots  as  determined 
by  the  leading  decisions  of  the  courts  of  all  the  states.  Although  appa- 
rently plain,  the  provisions  of  the  Negotiable  Instruments  Law  have  been 
the  subject  for  many  thousand  legal  actions  and  but  few  sections  have 
escaped  the  necessity  of  legal  interpretation.  It  was  the  aim  to  condense 
these  decisions  in  language  that  would  be  plain  to  the  bank  clerk,  bank 
director  and  the  layman  dealing  with  commercial  paper,  and  also  to 
collect  the  leading  decisions  for  the  legal  practitioner  for  ready  reference. 
The  want  of  a  book  of  this  nature  has  been  generally  expressed  by 
bankers  and  the  legal  profession,  and  although  the  author  makes  no  pre- 
tension to  having  fulfilled  the  requirements,  it  is  hoped  that  the  book 
may  be  found  of  service. 

In  order  that  important  matters  might  be  more  forcibly  impressed 
on  the  reader's  mind,  illustrations  of  negotiable  and  non-negotiable  paper 
have  been  supplied,  as  have  also  forms  used  in  connection  with  commer- 
cial paper  and  banking. 

It  has  been  the  aim  of  the  courts  in  the  forty-four  states  in  which 
the  Negotiable  Instruments  Law  has  been  adopted  to  construe  the  law 
to  make  it  uniform  wherever  questions  of  the  interpretation  of  the  statute 
have  been  presented.  Were  this  not  the  case  the  object  of  the  framers 
and  advocates  of  the  law  would  be  lost  and  the  intent  of  the  State  Legis- 
latures towards  uniformity  be  reduced  to  wreckage. 

While  the  Law  is,  with  few  exceptions,  uniform,  the  numbering  of 
the  sections  vary.  For  convenience  the  numbering  of  the  New  York 
statute  has  been  followed,  with  a  table  of  the  corresponding  sections  of 
the  other  states. 

From  an  almost  overwhelming  mass  of  law  and  precedent  selection 
has  been  made  of  what  seemed  to  be  the  most  important  and  useful. 
Trusting  that  the  volume  may  often  aid  and  seldom  mislead,  it  is  sub- 
mitted to  the  legal  profession,  bankers  and  others  dealing  with  com- 
mercial paper. 

X.     ,  J-  L.  W. 

Rochester,  N.  Y.,  May  24,  1917. 


740192 


The  Negotiable  Instmments  Law  adopted  in  the  following  States 
and  Territories. 

Alabama.— Laws  of  1907,  No.  722,  p.  660. 

Arizona. — Laws  of  1905,  Ch.  23. 

Arkansas. — Law  of  1913,  Act  81. 

Colorado.— Laws  of  1897,  Ch.  64. 

Connecticut. — Laws  of  1897,  Ch.  74. 

Delaware.— Laws  of  1911,  Ch.  191. 

District  of  Columbia.— Laws  of  1899,  Chap.  47;  30  U.  S.  Stat,  at 
L.,  9,  785. 

Florida.— Laws  of  1897,  Chap.  4524. 

Hawaii.— Laws  of  1907,  Act  89. 

Idaho.— Laws  of  1903,  p.  380. 

Illinois.— Laws  of  1907,  p.  403. 

Indiana. — Laws  of  1913,  Chap.  63. 

Iowa.— Laws  of  1902,  Chap.  130;  Laws  of  1906,  Chap.  149. 

Kansas. — Laws  of  1905,  Chap.  310. 

Kentucky.— Laws  of  1904,  Chap.  102. 

Louisiana. — Laws  of  1904,  Act.  64. 

Maryland.— Laws  of  1898,  Chap.  119. 

Massachusetts. — Laws  of  1898,  Chap.  533;  Laws  of  1899,  Chap.  130 

Michigan.— Laws  of  1905,  Chap.  265,  p.  389. 

Minnesota. — Laws  of  1913,  Chap.  272. 

Missouri. — Laws  of  1905,  p.  243. 

Montana. — Laws  of  1903,  Chap.  121. 

Mississippi. — Laws  of  1916,  Ch.  244. 

Nebraska. — Laws  of  1905,  Chap.  83. 

Nevada. — Laws  of  1907,  Chap.  62. 

New  Hampshire. — Laws  of  1909,  Chap.  123. 

New  Jersey.— Laws  of  1902,  Chap.  184, 

New  Mexico. — Laws  of  1907,  Chap.  83. 

New  York.— Laws  of  1897,  Chap.  612;  Laws  of  1898,  Chap.  336. 

North  Carolina.— Laws  of  1899,  Chap.  733;  Laws  of  1905,  Chap.  327; 
Laws  of  1907,  Chap.  897. 

North  Dakota.— Laws  of  1899,  Chap.  113. 

Ohio.— Laws  of  1902,  p.  162. 

Oklahoma.— Laws  of  1909,  Chap.  24. 

Oregon.— Laws  of  1899,  p.  18. 

Pennsylvania. — Laws  of  1901,  p.  194. 

Rhode  Island.— Laws  of  1899,  Chap.  674. 

South  Carolina.— Laws  of  1914,  Act.  No.  396,  p.  668. 


South  Dakota.— Laws  of  1913,  Chap.  279. 
Tennessee. — Laws  of  1899,  Chap.  94. 
Utah.— Laws  of  1899,  Chap.  83. 
Vermont. — Laws  of  1912,  p.  114. 
Vii-ginia. — Laws  of  1898,  Chap.  866. 
Washington.— Laws  of  1899,  Chap.  149. 
West  Virginia.— Laws  of  1907,  Chap.  81. 
Wisconsin. — Laws  of  1899,  Chap.  356. 
Wyoming. — Laws  of  1905,  Chap.  43. 


I 

Table  of  Corresponding  Sections 

of  the 

X 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

N.I.L. 

Ala, 

Ariz. 

Col. 

Conn. 

D.C, 

Fla. 

Ida, 

III. 

Kan. 

K». 

Md. 

Mass, 
18 

Mich. 

1 

4958 

3304 

4464 

4171 

1305 

2935 

3458 

1 

4540 

1897 

20 

3 

2 

4959 

3305 

4465 

4172 

1306 

2936 

3459 

2 

4541 

1898 

21 

19 

4 

3 

4960 

3306 

4466 

4173 

1307 

2937 

3460 

3 

4542 

1899 

22 

20 

5 

4 

4961 

3307 

4467 

4174 

1308 

(2938 
J  2939 

3461 

4 

4543 

1900 

23 

21 

6 

5 

4962 

3308 

4468 

4175 

1309 

2939 

3462 

5 

4544 

1901 

24 

22 

7 

6 

4963 

3309 

4469 

4176 

1310 

2940 

3463 

6 

4545 

1902 

25 

23 

8 

7 

4965 

3310 

4470 

4177 

1312 

2941 

3464 

7 

4546 

1903 

26 

24 

9 

8 

4965 

3311 

4471 

4178 

1312 

2942 

3465 

8 

4547 

1904 

27 

25 

10 

9 

4966 

3312 

4472 

4179 

1313 

2943 

3466 

9 

4548 

1905 

28 

26 

11 

10 

4967 

3313 

4473 

4180 

1314 

2944 

3467 

10 

4549 

1906 

29 

27 

12 

11 

4968 

3314 

4474 

4181 

1315 

2945 

3468 

11 

4550 

1907 

30 

28 

13 

12 

4969 

3315 

4475 

4182 

1316 

2946 

3469 

12 

4551 

1908 

31 

29 

14 

13 

4970 

3316 

4476 

4183 

1317 

2947 

3470 

13 

4552 

1909 

32 

30 

15 

14 

4971 

3317 

4477 

4184 

1318 

2948 

3471 

14 

4553 

1910 

33 

31 

16 

15 

4972 

3318 

4478 

4185 

1319 

2949 

3472 

15 

4554 

1911 

34 

32 

17 

16 

4973 

3319 

4479 

4186 

1320 

2950 

3473 

16 

4555 

1912 

35 

33 

18 

17 

4974 

3320 

4480 

4187 

1321 

2951 

3474 

17 

4556 

1913 

36 

34 

19 

18 

4975 

3321 

4481 

4188 

1322 

2952 

3475 

18 

4557 

1914 

37 

35 

20 

19 

4976 

3322 

4482 

4189 

1323 

2953 

3476 

19 

4558 

1915 

38 

36 

21 

20 

4977 

3323 

4483 

4190 

1324 

2954 

3477 

20 

4559 

1916 

39 

37 

22 

21 

4978 

3324 

4484 

4191 

1325 

2955 

3478 

21 

4560 

1917 

40 

38 

23 

22 

4979 

3325 

4485 

4192 

1326 

2956 

3479 

22 

4561 

1918 

41 

39 

24 

23 

4980 

3326 

4486 

4193 

1327 

2957 

3480 

23 

4562 

1919 

42 

40 

25 

24 

4981 

3327 

4487 

4194 

1328 

2958 

3481 

24 

4563 

1884 

43 

41 

26 

25 

4982 

3328 

4488 

4195 

1329 

2959 

3482 

25 

4564 

1885 

44 

42 

27 

26 

4982 

3329 

4489 

4196 

1330 

2960 

3483 

26 

4565 

1886 

45 

43 

28 

27 

4982 

3330 

4490 

4197 

1331 

2961 

3484 

27 

4566 

1887 

46 

44 

29 

28 

4983 

3331 

4491 

4198 

1332 

2962 

3485 

28 

4567 

1888 

47 

45 

30 

29 

4984 

3332 

4492 

4199 

1333 

2963 

3486 

29 

4568 

1889 

48 

46 

31 

30 

4985 

3333 

4493 

4200 

1334 

2964 

3487 

30 

4569 

1939 

49 

47 

32 

31 

4986 

3334 

4494 

4201 

1335 

2965 

3488 

31 

4570 

1940 

50 

48 

33 

32 

4987 

3335 

4495 

4202 

1336 

2966 

3489 

32 

4571 

1941 

51 

49 

34 

33 

4988 

3336 

4496 

4203 

1337 

2967 

3490 

33 

4572 

1942 

52 

50 

35 

34 

4989 

3337 

4497 

4204 

1338 

2968 

3491 

34 

4573 

1943 

53 

51 

36 

35 

4990 

3338 

4498 

4205 

1339 

2969 

3492 

35 

4574 

1944 

54 

52 

37 

Law  in  the  Various  States  and  Territories 


II 


14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

Mon. 

Neb. 

N.H. 

N.Y. 

N.  C. 

N.D. 

OKI, 

Ohio 

Ora, 

R.I. 

S.  D. 

Tenn, 

Utah 

Wis. 

5849 

1 

1 

20 

2151 

6303 

1 

3171 

4403 

7 

1 

1 

1553 

1675-1 

5850 

2 

2 

21 

2152 

6304 

2 

3171a 

4404 

8 

2 

2 

1554 

1675-2 

5851 

3 

3 

22 

2153 

6305 

3 

3171b 

4405 

9 

3 

3 

1555 

1675-3 

5852 

4 

4 

23 

2156 

6306 

4 

3171c 

4406 

10 

4 

4 

1556 

1675-4 

5853 

5 

5 

24 

2154 

6307 

5 

3171d 

4407 

11 

5 

5 

1557 

1675-5 

5854 

6 

6 

25 

2155 

6308 

6 

3171e 

4408 

12 

6 

6 

1558 

1675-6 

5855 

7 

7 

26 

2157 

6309 

7 

3171f 

4409 

13 

7 

7 

1559 

1675-7 

5856 

8 

8 

27 

2158 

6310 

8 

3171g 

4410 

14 

8 

8 

1560 

1675-8 

5857 

9 

9 

28 

2159 

6311 

9 

3171h 

4411 

15 

9 

9 

1561 

1675-9 

5858 

10 

10 

29 

2160 

6312 

10 

3171i 

4412 

16 

10 

10 

1562 

1675-10 

5859 

11 

11 

30 

2161 

6313 

11 

3171J 

4413 

17 

11 

11 

1563 

1675-11 

5860 

12 

12 

31 

2162 

6314 

12 

3171k 

4414 

18 

12 

12 

1564 

1675-12 

5861 

13 

13 

32 

2163 

6315 

13 

31711 

4415 

19 

13 

13 

1565 

1675-13 

5862 

14 

14 

33 

2164 

6316 

14 

3171m 

4416 

20 

14 

14 

1566 

1675-14 

5863 

15 

15 

34 

2165 

6317 

15 

3171n 

4417 

21 

15 

15 

1567 

1675-15 

5864 

16 

16 

35 

2166 

6318 

16 

3171o 

4418 

22 

16 

16 

1568 

1675-16 

5865 

17 

17 

36 

2341 

6319 

17 

3171p 

4419 

23 

17 

17 

1569 

1675-17 

5866 

18 

18 

37 

2167 

6320 

18 

3171q 

4420 

24 

18 

18 

1570 

1675-18 

5867 

19 

19 

38 

2168 

6321 

19 

3171r 

4421 

25 

19 

19 

1571 

1675-19 

5868 

20 

20 

39 

2169 

6322 

20 

3171s 

4422 

26 

20 

20 

1572 

1675-20 

5869 

21 

21 

40 

2170 

6323 

21 

3171t 

4423 

27 

21 

21 

1573 

1675-21 

5870 

22 

22 

41 

2180 

6324 

22 

3171u 

4424 

28 

22 

22 

1574 

1675-22 

5871 

23 

23 

42 

2171 

6325 

23 

3171v 

4425 

29 

23 

23 

1575 

1675-23 

5872 

24 

24 

50 

2172 

6326 

24 

3171w 

4426 

30 

24 

24 

1576 

1675-50 

5873 

25 

25 

51 

2173 

6327 

25 

3171x 

4427 

31 

25 

25 

1577 

1675-51 

5874 

26 

26 

52 

2174 

6328 

26 

3171y 

4428 

32 

26 

26 

1578 

1675-52 

5875 

27 

27 

53 

2175 

6329 

27 

3171z 

4429 

33 

27 

27 

1579 

1675-53 

5876 

28 

28 

54 

2176 

6330 

28 

3172 

4430 

34 

28 

28 

1580 

1675-54 

5877 

29 

29 

55 

2177 

6331 

29 

3172a 

4431 

35 

29 

29 

1581 

1675-55 

5878 

30 

30 

60 

2178 

6332 

30 

3172b 

4432 

36 

30 

35 

1582 

1676 

5879 

31 

31 

61 

2179 

6333 

31 

3172c 

4433 

37 

31 

31 

1583 

1676-1 

5880 

32 

32 

62 

2181 

6334 

32 

3172d 

4434 

38 

32 

32 

1584 

1676-2 

5881 

33 

33 

63 

2182 

6335 

33 

3172e 

4435 

39 

33 

33 

1585 

1676-3 

5882 

34 

34 

64 

2183 

6336 

34 

3172f 

4436 

40 

34 

34 

1586 

1676^ 

5883 

35 

35 

65 

2184 

6337 

35 

3172g 

4437 

41 

35 

35 

1587 

1676-5 

Ill 


X 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

N.I.I. 

Ala. 

Ariz. 

Col. 

Conn. 

D.  C. 

Fla. 

Ida. 

III. 

Kan. 

Kj. 

Md. 

Mass 

Mich. 

36 

4991 

3339 

4499 

4206 

1340 

2970 

3493 

36 

4575 

1945 

55 

53 

38 

37 

4992 

3340 

4500 

4207 

1341 

2971 

3494 

37 

4576 

1946 

56 

54 

39 

38 

4993 

3341 

4501 

4208 

1342 

2972 

3495 

38 

4577 

1947 

57 

55 

40 

39 

4994 

3342 

4502 

4209 

1343 

2973 

3496 

39 

4578 

1948 

58 

56 

41 

40 

4995 

3343 

4503 

4210 

1344 

2974 

3497 

40 

4579 

1949 

59 

57 

42 

41 

4996 

3344 

4504 

4211 

1345 

2975 

3498 

41 

4580 

1950 

60 

58 

43 

42 

4997 

3345 

4505 

4212 

1346 

2976 

3499 

42 

4581 

1951 

61 

59 

44 

43 

4998 

3346 

4506 

4213 

1347 

2977 

3500 

43 

4582 

1952 

62 

60 

45 

44 

4999 

3347 

4507 

4214 

1348 

2978 

3501 

44 

4583 

1953 

63 

61 

46 

45 

5000 

3348 

4508 

4215 

1349 

2979 

3502 

45 

4584 

1954 

64 

62 

47 

46 

5001 

3349 

4509 

4216 

1350 

2979 

3503 

46 

4585 

1955 

65 

63 

48 

47 

5002 

3350 

4510 

4217 

1351 

2980 

3504 

47 

4586 

1956 

66 

64 

49 

48 

5003 

3351 

4511 

4218 

1352 

2981 

3505 

48 

4587 

1957 

67 

65 

50 

49 

5004 

3352 

4512 

4219 

1353 

2982 

3506 

49 

4588 

1958 

68 

66 

51 

50 

5005 

3353 

4513 

4220 

1354 

2983 

3507 

50 

4589 

1958 

69 

67 

52 

51 

5006 

3354 

4514 

4221 

1355 

2984 

3508 

51 

4590 

1920 

70 

68 

53 

52 

5007 

3355 

4515 

4222 

1356 

2985 

3509 

52 

4591 

1921 

71 

69 

54 

53 

5008 

3356 

4516 

4223 

1357 

2986 

3510 

53 

4592 

1922 

72 

70 

55 

54 

5009 

3357 

4517 

4224 

1358 

2987 

3511 

54 

4593 

1923 

73 

71 

56 

55 

5010 

3358 

4518 

4225 

1359 

2988 

3512 

55 

4594 

1924 

74 

72 

57 

56 

5011 

3359 

4519 

4226 

1360 

2989 

3513 

56 

4595 

1925 

75 

73 

58 

57 

5012 

3360 

4520 

4427 

1361 

2990 

3514 

57 

4596 

1926 

76 

74 

59 

58 

5013 

3361 

4521 

4228 

1362 

2991 

3515 

58 

4597 

1927 

77 

75 

60 

59 

5014 

3362 

4522 

4229 

1363 

2992 

3516 

59 

4598 

1928 

78 

76 

61 

60 

5015 

3363 

4523 

4230 

1364 

2993 

3517 

60 

4599 

1929 

79 

77 

62 

61 

5016 

3364 

4524 

4231 

1365 

2994 

3518 

61 

4600 

1930 

80 

78 

63 

62 

5017 

3365 

4525 

4232 

1366 

2995 

3519 

62 

4601 

1931 

81 

79 

64 

63 

5018 

3366 

4526 

4233 

1367 

2996 

3520 

63 

4602 

1932 

82 

80 

65 

64 

5019 

3367 

4527 

4234 

1368 

2947 

3521 

64 

4603 

1933 

83 

81 

66 

65 

5020 

3368 

4528 

4235 

1369 

2948 

3522 

65 

4604 

1934 

84 

82 

67 

66 

5021 

3369 

4529 

4236 

1370 

2999 

3523 

66 

4605 

1935 

85 

83 

68 

67 

5022 

3370 

4530 

4237 

1371 

3000 

3524 

67 

4606 

1936 

86 

84 

69 

68 

5023 

3371 

4531 

4238 

1372 

3001 

3525 

68 

4607 

1937 

87 

85 

70 

69 

5024 

3372 

4532 

4239 

1373 

3002 

3526 

69 

4608 

1938 

88 

86 

71 

70 

5025 

3373 

4533 

4240 

1374 

3003 

3527 

70 

4609 

1990 

89 

87 

72 

71 

5026 

3374 

4534 

4241 

1375 

3004 

3528 

71 

4610 

1991 

90 

88 

73 

72 

5027 

3375 

4535 

4242 

1376 

3005 

4529 

72 

4611 

1992 

91 

89 

74 

73 

5028 

3376 

4536 

4243 

1377 

3006 

3530 

73 

4612 

1993 

92 

90 

75 

74 

5029 

3377 

4537 

4244 

1378 

3007 

3531 

74 

4613 

1994 

93 

91 

76 

75 

5030 

3378 

4538 

4245 

1379 

3008 

3532 

75 

4614 

1995 

94 

92 

77 

IV 


14 

15 

16 

17 

18 

19  20 

21 

22 

23 

24 

25 

26 

27 

Mon. 

Neb. 

N.H. 

N.  Y, 

N.  C. 

N.  D. 

OKI, 

Ohio 

Ore. 

R.  1. 

S.  D. 

Tenn. 

Utah 

Wis. 

5884 

36 

36 

66 

2185 

6338 

36 

3172h 

4438 

42 

36 

36 

1588 

1676-6 

5885 

37 

37 

67 

2186 

6339 

37 

31721 

4439 

43 

37 

37 

1589 

1676-7 

5886 

38 

38 

68 

2187 

6340 

38 

3172] 

4440 

44 

38 

38 

1590 

1676-8 

5887 

39 

39 

69 

2188 

6341 

39 

3172k 

4441 

45 

39 

39 

1591 

1676-9 

5888 

40 

40 

70 

2189 

6342 

40 

31721 

4442 

46 

40 

40 

1592 

1676-10 

5889 

41 

41 

71 

2190 

6343 

41 

3172m 

4443 

47 

41 

41 

1593 

1676-11 

5890 

42 

42 

72 

2191 

6344 

42 

2173n 

4444 

48 

42 

42 

1594 

1676-12 

5891 

43 

43 

73 

2192 

6345 

43 

3172o 

4445 

49 

43 

43 

1595 

1676-13 

5892 

44 

44 

74 

2193 

6346 

44 

3172p 

4446 

50 

44 

44 

1596 

1676-14 

5893 

45 

45 

75 

2194 

6347 

45 

3172q 

4447 

51 

45 

45 

1597 

1676-15 

5894 

46 

46 

76 

2195 

6348 

46 

3172r 

4448 

52 

46 

46 

1598 

1676-16 

5895 

47 

47 

77 

2196 

6349 

47 

3172s 

4449 

53 

47 

47 

1599 

1676-17 

5896 

48 

48 

78 

2197 

6350 

48 

3172t 

4450 

54 

48 

48 

1600 

1676-18 

5897 

49 

49 

79 

2198 

6351 

49 

3172u 

4451 

55 

49 

49 

1601 

1676-19 

5898 

50 

50 

80 

2199 

6352 

50 

3172v 

4452 

56 

50 

50 

1602 

1676-20 

5899 

51 

51 

90 

2200 

6353 

51 

3172w 

4453 

57 

51 

51 

1603 

1676-21 

5900 

52 

52 

91 

2201 

6354 

52 

3172x 

4454 

58 

52 

52 

1604 

1676-22 

5901 

53 

53 

92 

2202 

6355 

53 

3172y 

4455 

59 

53 

53 

1605 

1676-23 

5902 

54 

54 

93 

2203 

6356 

54 

3172z 

4456 

60 

54 

54 

1606 

1676-24 

5903 

55 

55 

94 

2204 

6357 

55 

3173 

4457 

61 

55 

55 

1607 

1676-25 

5904 

56 

56 

95 

2205 

6358 

56 

3173a 

4458 

62 

56 

56 

1608 

1676-26 

5905 

57 

57 

96 

2206 

6359 

57 

3173b 

4459 

63 

57 

57 

1609 

1676-27 

5906 

58 

58 

97 

2207 

6360 

57 

3173c 

4460 

64 

58 

58 

1610 

1676-28 

5907 

59 

59 

98 

2208 

6361 

59 

3173d 

4461 

65 

59 

59 

1611 

1676-29 

5908 

60 

60 

110 

2209 

6362 

60 

3173e 

4462 

66 

60 

60 

1612 

1677 

5909 

61 

61 

111 

2210 

6363 

61 

3173f 

4463 

67 

61 

61 

1613 

1677-1 

5910 

62 

62 

112 

2211 

6364 

63 

3173g 

4464 

68 

62 

62 

1614 

1677-2 

5911 

63 

63 

113 

2212 

6365 

63 

3173h 

4465 

69 

63 

63 

1615 

1677-3 

5912 

64 

64 

114 

2213 

6366 

64 

31731 

4466 

70 

64 

64 

1616 

1677-4 

5913 

65 

65 

115 

2214 

6367 

65 

3173J 

4467 

71 

65 

65 

1617 

1677-5 

5914 

66 

66 

116 

2215 

6368 

66 

3173k 

4468 

72 

66 

66 

1618 

1677-6 

5915 

67 

67 

117 

2216 

6369 

67 

31731 

4469 

73 

67 

67 

1619 

1677-7 

5916 

68 

68 

118 

2217 

6370 

68 

3173m 

4470 

74 

68 

68 

1620 

1677-8 

5917 

69 

69 

119 

2218 

6371 

69 

3173n 

4471 

75 

69 

69 

1621 

1677-9 

5918 

70 

70 

130 

2219 

6372 

70 

3173o 

4472 

76 

70 

70 

1622 

1678 

5919 

71 

71 

131 

2220 

6373 

71 

3173p 

4473 

77 

71 

71 

1623 

1678-1 

5920 

72 

72 

132 

2221 

6374 

72 

3173q 

4474 

78 

72 

72 

1624 

1678-2 

5921 

73 

73 

133 

2222 

6375 

73 

3173r 

4475 

79 

73 

73 

1625 

1678-3 

5922 

74 

74 

134 

2223 

6376 

74 

3173s 

4476 

80 

74 

74 

1626 

1678-4 

5923 

75 

75 

135 

2224 

6377 

75 

3173t 

4477 

81 

75 

75 

1627 

1678-5 

X 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

N.I.L. 

Ala. 

Ariz, 

Col. 

Conn, 

D,  C, 

Fla, 

Ida. 

III, 

Kan, 

Kr, 

Md. 

Mass. 

Mich. 

76 

5031 

3379 

4539 

4246 

1380 

3009 

3533 

76 

4615 

1996 

95 

93 

78 

77 

5032 

3380 

4540 

4247 

1381 

3010 

3534 

77 

4616 

1997 

96 

94 

79 

78 

5033 

3381 

4541 

4248 

1382 

3011 

3535 

78 

4617 

1998 

97 

95 

80 

79 

5034 

3382 

4542 

4549 

1383 

3012 

3536 

79 

4618 

1999 

98 

96 

81 

80 

5035 

3383 

4543 

4250 

1384 

3012 

3537 

80 

4619 

2000 

99 

97 

82 

81 

5036 

3384 

4544 

4251 

1385 

3013 

3538 

81 

4620 

2001 

100 

98 

83 

82 

5037 

3385 

4545 

4252 

1386 

3014 

3539 

82 

4621 

2002 

101 

99 

84 

83 

5038 

3386 

4546 

4253 

1387 

3015 

3540 

83 

4622 

2003 

102 

100 

85 

84 

5038 

3387 

4547 

4254 

1388 

3016 

3541 

84 

4623 

2004 

103 

101 

86 

85 

5039 

3388 

4548 

4255 

1389 

3017 

3542 

85 

4624 

2005 

104 

102 

87 

86 

5040 

3389 

4549 

4256 

1390 

3017 

3543 

86 

4625 

2006 

105 

103 

88 

87 

5041 

3390 

4550 

4257 

1391 

3018 

3544 

4626 

2007 

106 

104 

89 

88 

5042 

3391 

4551 

4258 

1392 

3019 

3545 

87 

4627 

2008 

107 

105 

90 

89 

5043 

2392 

4552 

4259 

1393 

3020 

3546 

88 

4628 

1960 

108 

106 

91 

90 

5044 

3393 

4553 

4260 

1394 

3021 

3547 

89 

4629 

1961 

109 

107 

92 

91 

5045 

3394 

4554 

4261 

1395 

3022 

3548 

90 

4630 

1962 

110 

108 

93 

92 

5046 

3395 

4555 

4262 

1396 

3023 

3549 

91 

4631 

1963 

111 

109 

94 

93 

5047 

3396 

4556 

4263 

1397 

3024 

3550 

92 

4632 

1964 

112 

110 

95 

94 

5047 

3397 

4557 

4264 

1398 

3025 

3551 

93 

4633 

1965 

113 

111 

96 

95 

5048 

3398 

4558 

4265 

1399 

3026 

3552 

94 

4634 

1966 

114 

112 

97 

96 

5048 

3399 

4559 

4266 

1400 

3027 

3553 

95 

4635 

1967 

115 

113 

98 

97 

5049 

3400 

4560 

4267 

1401 

3027 

3554 

96 

4636 

1968 

116 

114 

99 

98 

5050 

3401 

4561 

4268 

1402 

3028 

3555 

97 

4637 

1969 

117 

115 

100 

99 

5051 

3402 

4562 

4269 

1403 

3029 

3556 

98 

4638 

1970 

118 

116 

101 

100 

5052 

3403 

4563 

4270 

1404 

3029 

3557 

99 

4639 

1971 

119 

117 

102 

101 

5053 

3404 

4564 

4271 

1405 

3030 

3558 

100 

4640 

1972 

120 

118 

103 

102 

5054 

3405 

4565 

4272 

1406 

3031 

3559 

101 

4641 

1973 

121 

119 

104 

103 

5055 

3406 

4566 

4273 

1407 

3031 

3560 

102 

4642 

1974 

122 

120 

105 

104 

5056 

3407 

4567 

4274 

1408 

3032 

3561 

103 

4643 

1975 

123 

121 

106 

105 

5057 

3408 

4568 

4275 

1409 

3033 

3562 

104 

4644 

1976 

124 

122 

107 

106 

5056 

3409 

4569 

4276 

1410 

3033 

3563 

105 

4645 

1977 

125 

123 

108 

107 

5058 

3410 

4570 

4277 

1411 

3034 

3564 

106 

4646 

1978 

126 

124 

109 

108 

5059 

3411 

4571 

4278 

1412 

3035 

3565 

107 

4647 

1979 

127 

125 

110 

109 

5060 

3412 

4572 

4279 

1413 

3036 

3566 

108 

4648 

1980 

128 

126 

111 

110 

5060 

3413 

4573 

4280 

1414 

3036 

3567 

109 

4649 

1981 

129 

127 

112 

111 

5060 

3414 

4574 

4281 

1415 

3036 

3568 

110 

4650 

1982 

130 

128 

113 

112 

5061 

3415 

4575 

4282 

1416 

3037 

3569 

111 

4651 

1983 

131 

129 

114 

113 

5062 

3416 

4576 

4283 

1417 

3038 

3570 

112 

4652 

1984 

132 

130 

115 

114 

5063 

3417 

4577 

4284 

1418 

3039 

3571 

113 

4653 

1985 

133 

131 

116 

115 

5064 

3418 

4578 

4285 

1419 

3039 

3572 

114 

4654 

1986 

134 

132 

117 

VI 


14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

Mon, 

Neb. 

N.H. 

N.Y, 

N.  C. 

N.  0. 

OKI. 

Ohio 

On. 

I.I. 

S.  0. 

Ttnn. 

Utah 

wis. 

5924 

76 

76 

136 

2225 

6378 

76 

3173u 

4478 

82 

76 

76 

1628 

1678-6 

5925 

77 

77 

137 

2226 

6379 

77 

3173v 

4479 

83 

77 

77 

1629 

1678-7 

5926 

78 

78 

138 

2227 

6380 

78 

3173w 

4480 

84 

78 

78 

1630 

1678-8 

5927 

79 

79 

139 

2228 

6381 

79 

3173x 

4481 

85 

79 

79 

1631 

1678-9 

5928 

80 

80 

140 

2229 

6382 

80 

3173y 

4482 

86 

80 

80 

1632 

1678-10 

5929 

81 

81 

141 

2230 

6383 

81 

3173z 

4483 

87 

81 

81 

1633 

1678-11 

5930 

82 

82 

142 

2231 

6384 

82 

3174 

4484 

88 

82 

82 

1634 

1678-12 

5931 

83 

83 

143 

2232 

6385 

83 

3174a 

4485 

89 

83 

83 

1635 

1678-13 

5932 

84 

84 

144 

2233 

6386 

84 

3174b 

4486 

90 

84 

84 

1636 

1678-14 

5933 

85 

85 

145 

2234 

6387 

85 

3174c 

4487 

91 

85 

85 

1637 

1678-15 

5934 

86 

86 

146 

2236 

6388 

86 

3174d 

4488 

92 

86 

86 

1638 

1678-16 

5935 

87 

147 

2237 

6389 

87 

3174e 

4489 

93 

87 

1639 

1678-17 

5936 

87 

88 

148 

2238 

6390 

88 

3174f 

4490 

94 

87 

88 

1640 

1678-18 

5937 

88 

89 

160 

2239 

6391 

80 

3174g 

4491 

85 

88 

89 

1641 

1678-19 

5938 

89 

90 

161 

2240 

6392 

90 

3174h 

4492 

96 

89 

90 

1642 

1678-20 

5939 

90 

91 

162 

2241 

6393 

91 

3174i 

4493 

97 

90 

91 

1643 

1678-21 

5940 

91 

92 

163 

2242 

6394 

92 

3174J 

4494 

98 

91 

92 

1644 

1678-22 

5941 

92 

93 

164 

2243 

6395 

93 

3174k 

4495 

99 

92 

93 

1645 

1678-23 

5942 

93 

94 

165 

2244 

6396 

94 

31741 

4496 

100 

93 

94 

1646 

1678-24 

5943 

94 

95 

166 

2245 

6397 

95 

3174m 

4497 

101 

94 

95 

1647 

1678-25 

5944 

95 

96 

167 

2246 

6398 

96 

3174n 

4498 

102 

95 

96 

1648 

1678-26 

5945 

96 

97 

168 

2247 

6399 

97 

31740 

4499 

103 

96 

97 

1649 

1678-27 

5946 

97 

98 

169 

2248 

6400 

98 

3174p 

4500 

104 

97 

98 

1650 

1678-28 

5947 

98 

99 

170 

2249 

6401 

99 

3174q 

4501 

105 

98 

99 

1651 

1678-29 

5948 

99 

100 

171 

2250 

6402 

100 

3174r 

4502 

106 

99 

100 

1652 

1678-30 

5949 

100 

101 

172 

2251 

6403 

101 

3174s 

4503 

107 

100 

101 

1653 

1678-31 

5950 

101 

102 

173 

2252 

6404 

102 

3174t 

4504 

108 

101 

102 

1654 

1678-32 

5951 

102 

103 

174 

2253 

6405 

103 

3174u 

4505 

109 

102 

103 

1655 

1678-33 

5952 

103 

104 

175 

2254 

6406 

104 

3174V 

4506 

110 

103 

104 

1656 

1678-34 

5953 

104 

105 

176 

2255 

6407 

105 

3174w 

4507 

HI 

104 

105 

1657 

1678-35 

5954 

105 

106 

177 

2256 

6408 

106 

3174x 

4508 

112 

105 

106 

1658 

1678-36 

5955 

106 

107 

178 

2257 

6409 

107 

3174y 

4509 

113 

106 

107 

1659 

1678-37 

5956 

107 

108 

179 

2258 

6410 

108 

3174z 

4510 

114 

107 

108 

1660 

1678-38 

5957 

108 

109 

180 

2259 

6411 

109 

3175 

4511 

115 

108 

109 

1661 

1678-39 

5958 

109 

110 

181 

2260 

6412 

110 

3175a 

4512 

116 

109 

110 

1662 

1678^0 

5959 

110 

111 

182 

2261 

6413 

HI 

3175b 

4513 

117 

110 

111 

1663 

1678^1 

5960 

111 

112 

183 

2262 

6414 

112 

3175c 

4514 

118 

111 

112 

1664 

1678-42 

5961 

112 

113 

184 

2263 

6415 

113 

3175d 

4515 

119 

112 

113 

1665 

1678-43 

5962 

113 

114 

185 

2264 

6416 

114 

3175e 

4516 

120 

113 

114 

1665x 

1678-^ 

5963 

114 

115 

186 

2265 

6417 

115 

3175f 

4517 

121 

114 

115 

1665x1 

1678-45 

VII 


X 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

N.I.I. 

M. 

H\l. 

Col. 

Conn. 

D.  C. 

Fla. 

Ida. 

III. 

Kan. 

Ky. 

Md. 

Mass. 

133 

Mich. 

116 

5065 

3419 

4579 

4286 

1420 

3039 

3573 

115 

4655 

1987 

135 

118 

117 

5066 

3420 

4580 

4287 

1421 

3040 

3574 

116 

4656 

1988 

136 

134 

119 

118 

5067 

3421 

4581 

4288 

1422 

3041 

3575 

117 

4657 

1989 

137 

135 

120 

119 

5068 

3422 

4582 

4289 

1423 

3042 

3576 

118 

4658 

1890 

138 

136 

121 

120 

5069 

3423 

4683 

4290 

1424 

3042 

3577 

119 

4659 

1891 

139 

137 

122 

121 

5070 

3424 

4584 

4291 

1425 

3043 

3578 

120 

4660 

1892 

140 

138 

123 

122 

5071 

3425 

4585 

4292 

1426 

3044 

3579 

121 

4661 

1893 

141 

139 

124 

123 

5072 

3426 

4586 

4293 

1427 

3045 

3580 

122 

4662 

1894 

142 

140 

125 

124 

5073 

3427 

4587 

4294 

1428 

3046 

3581 

123 

4663 

1895 

143 

141 

126 

125 

5074 

3428 

4588 

4295 

1429 

3046 

3582 

124 

4664 

1896 

144 

142 

127 

126 

5075 

3429 

4589 

4296 

1430 

3047 

3583 

125 

4665 

1826 

145 

143 

128 

127 

5076 

3430 

4590 

4297 

1431 

3047 

3584 

126 

4666 

1827 

146 

144 

129 

128 

5077 

3431 

4591 

4298 

1432 

3047 

3585 

127 

4667 

1828 

147 

145 

130 

129 

5078 

3432 

4592 

4299 

1433 

3048 

3586 

128 

4668 

1829 

148 

146 

131 

130 

5079 

3433 

4593 

4300 

1434 

3049 

3587 

129 

4669 

1830 

149 

147 

132 

131 

5080 

3434 

4594 

4301 

1435 

3050 

3588 

130 

4670 

1831 

150 

148 

133 

132 

5081 

3435 

4595 

4302 

1436 

3051 

3589 

131 

4671 

1832 

151 

149 

134 

133 

5082 

3436 

4596 

4303 

1437 

3051 

3590 

132 

4672 

1833 

152 

150 

135 

134 

5083 

3437 

4597 

4304 

1438 

3051 

3591 

133 

4673 

1834 

153 

151 

136 

135 

5084 

3438 

4598 

4305 

1439 

3052 

3592 

134 

4674 

1835 

154 

152 

137 

136 

5085 

3439 

4599 

4306 

1440 

3053 

3593 

135 

4675 

1836 

155 

153 

138 

137 

5086 

3440 

4600 

4307 

1441 

3054 

3594 

4676 

1837 

156 

154 

139 

138 

5087 

3441 

4601 

4308 

1442 

3055 

3595 

136 

4677 

1838 

157 

155 

140 

139 

5088 

3442 

4602 

4309 

1443 

3056 

3596 

138 

4678 

1839 

158 

156 

141 

140 

5089 

3443 

4603 

4310 

1444 

3056 

3597 

139 

4679 

1840 

159 

157 

142 

141 

5090 

3444 

4604 

4311 

1445 

3056 

3598 

140 

4680 

1841 

160 

158 

143 

142 

5091 

3445 

4605 

4312 

1446 

3057 

3599 

141 

4681 

1842 

161 

159 

144 

143 

5092 

3446 

4606 

4313 

1447 

3058 

3600 

142 

4682 

1843 

162 

160 

145 

144 

5093 

3447 

4607 

4314 

1448 

3059 

3601 

143 

4683 

1844 

163 

161 

146 

145 

5094 

3448 

4608 

4315 

1449 

3060 

3602 

144 

4684 

1845 

164 

162 

147 

146 

5094 

3449 

4609 

4316 

1450 

3061 

3603 

145 

4685 

1846 

165 

163 

148 

147 

5095 

3450 

4610 

4317 

1451 

3062 

3604 

146 

4686 

1847 

166 

164 

149 

148 

5095 

3451 

4611 

4318 

1452 

3062 

3605 

147 

4687 

1848 

167 

165 

150 

149 

5097 

3452 

4612 

4319 

1453 

3063 

3606 

148 

4688 

1849 

168 

166 

151 

150 

5098 

3453 

4613 

4320 

1454 

3063 

3607 

149 

4689 

1850 

169 

167 

152 

151 

5099 

3454 

4614 

4321 

1455 

3064 

3608 

150 

4690 

1851 

170 

168 

153 

152 

5100 

3455 

4615 

4322 

1456 

3065 

3609 

151 

4691 

1875 

171 

169 

154 

153 

5101 

3456 

4616 

4323 

1457 

3066 

3610 

152 

4692 

1876 

172 

170 

155 

154 

5102 

3457 

4617 

4324 

1458 

3066 

3611 

153 

4693 

1877 

173 

171 

156 

155 

5103 

3458 

4618 

4325 

1459 

3067 

3612 

154 

4694 

1873 

174 

172 

157 

VIII 


14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

Mon. 

Neb. 

N.  H. 

N.Y. 

N.  C. 

N.  D. 

m. 

Ohio 

Ore. 

R.I. 

S.D. 

Tenn. 

Utah 

wis. 

5964 

115 

116 

187 

2266 

6418 

116 

3175g 

4518 

122 

115 

116 

1665x2 

1678^6 

5965 

116 

117 

188 

2267 

6419 

117 

3175h 

4519 

123 

116 

117 

1665x3 

1678-47 

5966 

117 

118 

189 

2268 

6420 

118  3175i 

4520 

124 

117 

118 

1665x4 

1678-48 

5967 

118 

119 

200 

2269 

6421 

119  3175J 

4521 

125 

118 

119 

1665x5 

1679 

5968 

119 

120 

201 

2270 

6422 

120 

3175k 

4522 

126 

119 

120 

1665x6 

1679-1 

5969 

120 

121 

202 

2271 

6423 

121 

31751 

4523 

127 

120 

121 

1665x7 

1679-2 

5970 

121 

122 

203 

2272 

6424 

122 

3175m 

4524 

128 

121 

122 

1665x8 

1679-3 

5971 

122 

123 

204 

2273 

6425 

123 

3175n 

4525 

129 

122 

123 

1665x9 

1679-4 

5972 

123 

124 

205 

2274 

6426 

124 

3175o 

4526 

130 

123 

124 

1665x10 

1679-5 

5973 

124 

125 

206 

2275 

6427 

125 

3175p 

4527 

131 

124 

125 

1665x11 

1679-6 

5974 

125 

126 

210 

2276 

6428 

126 

3175q 

4528 

132 

125 

126 

1664x12 

1680 

5975 

126 

127 

211 

2277 

6429 

127 

3175r 

4529 

133 

126 

127 

1665x13 

1680a 

5976 

127 

128 

212 

2278 

6430 

128 

3175s 

4530 

134 

127 

128 

1665x14 

1680b 

5977 

128 

129 

213 

2279 

6431 

129 

3175t 

4531 

135 

128 

139 

1665x15 

1680c 

5978 

129 

130 

214 

2280 

6432 

130 

3175u 

4532 

136 

129 

130 

1665x16 

1680d 

5979 

130 

131 

215 

2281 

6433 

131 

3175v 

4533 

137 

130 

131 

1665x17 

1680e 

5980 

131 

132 

220 

2282 

6434 

132 

3175w 

4534 

138 

131 

132 

1665x18 

1680f 

5981 

132 

133 

221 

2283 

6435 

133 

3175x 

4535 

139 

132 

183 

1665x19 

1680g 

5982 

133 

134 

222 

2284 

6436 

134 

3175y 

4536 

140 

133 

134 

1665x20 

1680h 

5983 

134 

135 

223 

2285 

6437 

135 

3175z 

4537 

141 

134 

135 

1665x21 

16801 

5984 

135 

136 

224 

2286 

6438 

136 

3176 

4538 

142 

135 

136 

1665x22 

1680J 

5985 

136 

137 

225 

2287 

6439 

137 

3176a 

4539 

143 

137 

1665x23 

1680k 

5986 

137 

138 

226 

2288 

6440 

138 

3176b 

4540 

144 

136 

138 

1665x24 

16801 

5987 

138 

139 

227 

2289 

6441 

139 

3176c 

4541 

145 

137 

139 

1665x25 

1680m 

5988 

139 

140 

228 

2290 

6442 

140 

3176d 

4542 

146 

138 

140 

1665x26 

1680n 

5989 

140 

141 

229 

2291 

6443 

141 

3176e 

4543 

147 

139 

141 

1665x27 

I68O0 

5990 

141 

142 

230 

2292 

6444 

142 

3176f 

4544 

148 

140 

142 

1665x28 

1680p 

5991 

142 

143 

240 

2293 

6445 

143 

3176g 

4545 

149 

141 

143 

1665x29 

1681 

5992 

143 

144 

241 

2294 

6446 

144 

3176h 

4546 

150 

142 

144 

1665x30 

1681-1 

5993 

144 

145 

242 

2295 

6447 

145 

31761 

4547 

151 

143 

145 

1665x31 

1681-2 

5994 

145 

146 

243 

2296 

6448 

146 

3176J 

4548 

152 

144 

146 

1665x32 

1681-3 

5995 

146 

147 

244 

2297 

6449 

147 

3176k 

4549 

153 

145 

147 

1665x33 

1681-4 

5996 

147 

148 

245 

2298 

6450 

148 

31761 

4550 

154 

146 

148 

1665x35 

1681-5 

5997 

148 

149 

246 

2299 

6451 

149 

3176m 

4551 

155 

147 

149 

1665x35 

1681-6 

5998 

149 

150 

247 

2300 

6452 

150 

3176n 

4552 

156 

148 

150 

1665x36 

1681-7 

5999 

150 

151 

248 

2301 

6453 

151 

3176o 

4553 

157 

149 

151 

1665x37 

1681-8 

6000 

151 

152 

260 

2302 

6454 

152 

3176p 

4554 

158 

150 

152 

1665x38 

1681-9 

6001 

152 

153 

261 

2303 

6455 

153 

3176q 

4555 

159 

151 

153 

1665x39 

1681-10 

6002 

153 

154 

262 

2304 

6456 

154 

3176r 

4556 

160 

152 

154 

1665x40 

1681-11 

6003 

154 

155 

263 

2305 

6457 

155 

3176s 

4557 

161 

153 

155 

1665x41 

1681-12 

IX 


X 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

N.I.L. 

Ala. 

h\i. 

Col. 

Conn. 

D.  C. 

Fla. 

Ida. 

III, 

Kan. 

Ky. 

Md. 

175 

Mass. 

173 

Mich. 

156 

5104 

3459 

4619 

4326 

1460 

3067 

3613 

155 

4695 

1879 

158 

157 

5105 

3460 

4620 

4327 

1461 

3068 

3614 

156 

4696 

1880 

176 

174 

159 

158 

5106 

3461 

4621 

4328 

1462 

3069 

3615 

157 

4697 

1881 

177 

175 

160 

159 

5107 

3462 

4622 

4329 

1463 

3070 

3616 

158 

4698 

1882 

178 

176 

161 

160 

5108 

3463 

4623 

4330 

1464 

3071 

3617 

159 

4699 

1883 

179 

177 

162 

161 

5109 

3464 

4624 

4331 

1465 

3073 

3618 

160 

4700 

1852 

180 

178 

163 

162 

5110 

3465 

4625 

4332 

1466 

3074 

3619 

161 

4701 

1853 

181 

179 

164 

163 

5111 

3466 

4626 

4333 

1467 

3075 

3620 

162 

4702 

1854 

182 

180 

165 

164 

5112 

3467 

4627 

4334 

1468 

3076 

3621 

163 

4703 

1855 

183 

181 

166 

165 

5113 

3468 

4628 

4335 

1469 

3076 

3622 

164 

4704 

1856 

184 

182 

167 

166 

5114 

3469 

4629 

4336 

1470 

3077 

3623 

165 

4705 

1857 

185 

183 

168 

167 

5115 

3470 

4630 

4337 

1471 

3078 

3624 

166 

4706 

1858 

186 

184 

169 

168 

5116 

3471 

4631 

4338 

1472 

3079 

3625 

167 

4707 

1859 

187 

185 

170 

169 

5117 

3472 

4632 

4339 

1473 

3080 

3626 

168 

4708 

1860 

188 

186 

171 

170 

5118 

3473 

4633 

4340 

1474 

3081 

3627 

169 

4709 

1861 

189 

187 

172 

171 

5119 

3474 

4634 

4341 

1475 

3082 

3628 

170 

4710 

1868 

190 

188 

173 

172 

5120 

3475 

4635 

4342 

1476 

3082 

3629 

171 

4711 

1869 

191 

189 

174 

173 

5120 

3476 

4636 

4343 

1477 

3083 

3630 

172 

4712 

1870 

192 

190 

175 

174 

5121 

3477 

4637 

4344 

1478 

3084 

3631 

173 

4713 

1871 

193 

191 

176 

175 

5122 

3478 

4638 

4345 

1479 

3085 

3632 

174 

4714 

1872 

194 

192 

177 

176 

5123 

3479 

4639 

4346 

1480 

3086 

3633 

175 

4715 

1873 

195 

193 

178 

177 

5124 

3480 

4640 

4347 

1481 

3086 

3634 

176 

4716 

1874 

196 

194 

170 

178 

5125 

3481 

4641 

4348 

1482 

3087 

3635 

177 

4717 

1862 

197 

195 

180 

179 

5126 

3482 

4642 

4349 

1483 

3088 

3636 

178 

4718 

1863 

198 

196 

181 

180 

5127 

3483 

4643 

4350 

1484 

3089 

3637 

179 

4719 

1864 

199 

197 

182 

181 

5128 

3484 

4644 

4351 

1485 

3090 

3638 

180 

4720 

1865 

200 

198 

183 

182 

5129 

3485 

4645 

4352 

1486 

3091 

3639 

181 

4721 

1866 

201 

199 

184 

183 

5130 

3486 

4646 

4353 

1487 

3092 

3640 

182 

4722 

1867 

202 

200 

185 

184 

5031 

3487 

4647 

4354 

1488 

3093 

3641 

183 

4723 

2009 

203 

201 

186 

185 

5032 

3487 

4648 

4355 

1489 

3094 

3642 

184 

4724 

2010 

204 

202 

187 

186 

5033 

3487 

4649 

4356 

1490 

3095 

3643 

185 

4725 

2011 

205 

203 

188 

187 

5034 

3487 

4650 

4357 

1491 

3096 

3644 

186 

4726 

2012 

206 

204 

189 

188 

5035 

3487 

4651 

4358 

1492 

3097 

3645 

187 

4727 

2013 

207 

205 

190 

189 

5036 

3487 

4652 

4359 

1493 

3098 

3646 

188 

4728 

2014 

208 

206 

191 

190 

5037 

4653 

2934 

3647 

189 

4533 

13 

1 

191 

5038 

3487 

4654 

4170 

1304 

2934 

3648 

190 

4534 

1820 

14 

207 

2 

192 

5039 

3488 

4655 

4170 

1304 

2934 

3649 

191 

4535 

1821 

15 

208 

2 

193 

5040 

3489 

4656 

4170 

1304 

2934 

3650 

192 

4536 

1822 

16 

209 

2 

194 

5041 

3490 

4657 

4170 

1304 

2934 

3651 

193 

4537 

1823 

17 

210 

2 

195 

5042 

4658 

4170 

1304 

3652 

194 

4538 

1824 

18 

211 

2 

196 

5043 

3491 

4659 

4170 

1304 

2934 

3653 

195 

4539 

19 

212 

2 

197 

196 

19 

198 

' 

X 


14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

Mo. 

Neb. 

N.H. 

N.Y. 

N.  C. 

N.  D. 

Okl. 

Ohio 

Ore. 

R.I. 

S.D. 

Tenn. 

Utah 

wis. 

6004 

155 

156 

264 

2306 

6458 

156 

3176t 

4558 

162 

154 

156 

1665x42 

1681- 

-13 

6005 

156 

157 

265 

2307 

6459 

157 

3176u 

4559 

163 

155 

157 

1665x43 

1681- 

-14 

6006 

157 

158 

266 

2308 

6460 

158 

3176V 

4560 

164 

156 

158 

1665x44 

1681- 

-15 

6007 

158 

159 

267 

2309 

6461 

159 

3176w 

4561 

165 

157 

159 

1665x45 

1681- 

-16 

6008 

159 

160 

268 

2310 

6462 

160 

3176X 

4562 

166 

158 

160 

1665x46 

1681- 

-17 

6009 

160 

161 

280 

2311 

6463 

161 

3176y 

4563 

167 

159 

161 

1665x47 

1681- 

-18 

6010 

161 

162 

281 

2312 

6464 

162 

3176z 

4564 

168 

160 

162 

1665x48 

1681- 

-19 

6011 

162 

163 

282 

2313 

6465 

163 

3177 

4565 

169 

161 

163 

1665x49 

1681- 

-20 

6012 

163 

164 

283 

2314 

6466 

164 

3177a 

4566 

170 

162 

164 

1665x50 

1681- 

-21 

6013 

164 

165 

284 

2315 

6467 

165 

31.77b 

4567 

171 

163 

165 

1665x51 

1681- 

-22 

6014 

165 

166 

285 

2316 

6468 

166 

3177c 

4568 

172 

164 

166 

1665x52 

1681- 

-23 

6015 

166 

167 

286 

2317 

6469 

167 

3177d 

4569 

173 

165 

167 

1665x53 

1681- 

-24 

6016 

167 

168 

287 

2318 

6470 

168 

3177e 

4570 

174 

166 

168 

1665x54 

1681- 

-25 

6017 

168 

169 

288 

2319 

6471 

169 

3177f 

4571 

175 

167 

169 

1665x55 

1681- 

-26 

6018 

169 

170 

289 

2320 

6472 

170 

3177g 

4572 

176 

168 

170 

1665x56 

1681- 

-27 

6019 

170 

171 

300 

2321 

6473 

171 

3177h 

4573 

177 

169 

171 

1665x57 

1681- 

-28 

6020 

171 

172 

301 

2322 

6474 

172 

3177i 

4574 

178 

170 

172 

1665x58 

1681- 

-29 

6021 

172 

173 

302 

2323 

6475 

173 

3177J 

4575 

179 

171 

173 

1665x59 

1681- 

-30 

6022 

173 

174 

303 

2324 

6476 

174 

3177k 

4576 

180 

172 

174 

1665x60 

1681- 

-31 

6023 

174 

175 

304 

2325 

6477 

175 

31771 

4577 

181 

173 

175 

1665x61 

1681- 

-32 

6024 

175 

176 

305 

2326 

6478 

176 

3177m 

4578 

182 

174 

176 

1665x62 

1681- 

-33 

6025 

176 

177 

306 

2327 

6479 

177 

3177n 

4579 

183 

175 

177 

1665x63 

1681- 

-34 

6026 

177 

178 

310 

2328 

6480 

178 

3177o 

4580 

184 

176 

178 

1665x64 

1681- 

-35 

6027 

178 

179 

311 

2329 

6481 

179 

3177p 

4581 

185 

177 

179 

1665x65 

1681- 

-36 

6028 

179 

180 

312 

2330 

6482 

180 

3177q 

4582 

186 

178 

180 

1665x66 

1681- 

-37 

6029 

180 

181 

313 

2331 

6483 

181 

3177r 

4583 

187 

179 

181 

1665x67 

1681- 

-38 

6030 

181 

182 

314 

2332 

6484 

182 

3177s 

4584 

188 

180 

182 

1665x68 

1681- 

-39 

6031 

182 

183 

315 

2333 

6485 

183 

3177t 

4585 

189 

181 

183 

1665x69 

1681- 

-40 

6032 

183 

184 

320 

2334 

6486 

184 

3177u 

4586 

190 

182 

184 

1665x70 

1684 

6033 

184 

185 

321 

2335 

6487 

185 

3177v 

4587 

191 

183 

185 

1665x71 

1684- 

-1 

6034 

185 

186 

322 

2336 

6488 

186 

3177w 

4588 

192 

184 

186 

1665x72 

1684- 

-2 

6035 

185 

187 

323 

2337 

6489 

187 

3177x 

4589 

193 

185 

187 

1665x73 

1684- 

-3 

6036 

187 

188 

324 

2338 

6490 

188 

3177y 

4590 

194 

186 

188 

1665x74 

1684-4 

6037 

188 

189 

325 

2339 

6491 

189 

3177z 

4591 

195 

187 

189 

1165x75 

1684- 

-5 

5482 
5483 

1 

6492 

I 

4592 

188 

1665x76 

189 

190 

2 

2340 

6493 

3178 

4592 

1 

189 

u 

1665x77 

1675 

5844 

190 

191 

3 

2342 

6494 

3178a 

4592 

2 

190 

1665x78 

1675 

5845 

191 

192 

4 

2343 

6495 

3178b 

4592 

3 

191 

1665x79 

1675 

5846 

192 

193 

5 

6495 

3178c 

4592 

4 

192 

0  ' 

1665x80 

1675 

5847 

193 

194 

6 

2345 

6497 

3178d 

4593 

5 

193 

si 

1665x81 

1675 

5848 

194 
197 
198 

195 
196 
196 

7 

2344 

6498 

I 
190 

3178e 

4594 

6 

194 

S5 

00  tS 

1665x82 

1675 
1684 

-7 

Note. — In  Alaska,  Arkansas,  Delaware,  Hawaii,  Iowa,  Kentucky.  Louisiana.  Mississippi,  Nevada, 
New  Jersey.  New  Mexico,  Pennsylvania,  Rhode  Island,  Vermont.  Virginia,  West  Virginia  and  Wyom- 
ing, the  numbers  are  the  same  as  in  the  commissioners'  draft  column  X. 


Negotiable  Instruments  Law 

Article  "i.  Short  title;  definitions  (§§  i,  2). 

2.  General  provisions  (§§  3-7). 

3.  Form  and  interpretation  (§§  20-42). 

4.  Consideration  (§§  50 — 55). 

5.  Negotiation  (§§  60-80). 

6.  Rights  of  holder  (§§  90-98). 

7.  Liabilities  of  parties  (§§  110-119). 

8.  Presentment  for  payment  (§§  130-148). 

9.  Notice  of  dishonor  (§§  160-189). 

10.  Discharge  (§§  200-206). 

11.  Bills  of  exchange;  form  and  interpretation  (§§  210- 

215)- 

12.  Acceptance  (§§  220-230). 

13.  Presentment  for  acceptance  (§§  240-248). 

14.  Protest  (§§  260-268). 

15.  Acceptance  for  honor  (§§  280-289). 

16.  Payment  for  honor  (§§  300-306). 

17.  Bills  in  sets  (§§  310-315). 

18.  Promissory  notes  and  checks  (§§  320-326). 

19.  Notes  given  for  patent  rights  and  for  a  speculative 

consideration  (§§  330-332). 

20.  Laws  repealed;  when  to  take  effect  (§§  340-341). 


2  NEGOTIABLE    INSTRUMENTS    LAW 

ARTICLE  I 
Short  Title:    Definitions 

Section  i.  Short  title. 
2.  Definitions. 

§  I.  Short  title.     This  chapter  shall  be  known  as  the 
"Negotiable  Instruments  Law." 

Variant. — Same  wording  as  proposed  by  the  Commissioners  of  Uni- 
formity of  Laws  and  used  in  most  of  the  states.  Several  states  have 
inserted  the  word  "uniform"  before  "negotiable." 


The  courts  of  the  different  states  in  construing  the  law  seek  to  follow 
the  original  intent  of  uniformity. 

Brown  v.  Brown,  91  Misc.  220;  State  Bank  of  Halsted,  162  Iowa,  443; 
Tosh  V.  Crafts,  193  Mass.  110;  Windsor  Cement  Co.  v.  Thompson,  86 
Conn.  511;  First  National  Bank  v.  Miller,  139  Wis.  126;  American  Trust 
Co.  V.  Conevin,  184  Fed.  Rep.  657;  Smith  v.  Nelson  Land  Co.  212  Fed. 
Rep.  56;  Schmidt  v.  Bank  of  Commerce,  234  U.  S.  64. 

While  the  law  has  been  adopted  by  practically  all  the  states  the 
courts  of  one  state  will  not  take  judicial  notice  of  its  adoption  in  another 
state  wnthout  proof  of  that  fact. 

Glcason  v.  Thayer,  87  Conn.  248;  Demelman  v.  Brazier,  193  Mass.  589. 

§  2.  Definitions.  In  this  chapter,  unless  the  context 
otherwise  requires: 

"Acceptance"  means  an  acceptance  completed  by  delivery 
or  notification. 

"Action"  includes  counter-claim  and  set-off. 

"Bank"  includes  any  person  or  association  of  persons 
carrying  on  the  business  of  banking,  whether  incorporated 
or  not. 

"Bearer"  means  the  person  in  possession  of  a  bill  or  note 
which  is  payable  to  bearer. 

"Bill"  means  bill  of  exchange,  and  "note"  means  negoti- 
able promissory  note. 

"Delivery"  means  transfer  of  possession,  actual  or  con- 
structive, from  one  person  to  another. 

"Holder"  means  the  payee  or  indorsee  of  a  bill  or  note, 
who  is  in  possession  of  it,  or  the  bearer  thereof. 


SHORT  title:  definitions  6 

"Indorsement"  means  an  indorsement  completed  by 
delivery. 

"Instrument"  means  negotiable  instrument. 

"Issue"  means  the  first  delivery  of  the  instrument,  com- 
plete in  form,  to  a  person  who  takes  it  as  a  holder. 

"Person"  includes  a  body  of  persons,  whether  incorpo- 
rated or  not. 

"Value"  means  valuable  consideration. 

"Written"  includes  printed,  and  "writing"  includes  print. 

The  rule  is  well  settled  that  words  having  precise  and  well-settled 
meaning  in  the  jurisprudence  of  a  country  have  the  same  sense  in  its 
statutes  unless  a  different  meaning  is  plainly  intended. 

Perkins  v.  Smith,  116  N.  Y.  441,  23  N.  E.  21;  Bell  v.  Terry,  163 
N.  Y.  Supp.  733. 

Person. — Defined  in  New  York  General  Construction  Law,  Sec.  37. 

Bearer. — If  the  maker  of  a  promissory  note  wrongfully  obtains 
possession  of  it  after  it  was  indorsed  in  blank  by  the  payee,  he  is  the  bearer 
within  the  meaning  of  the  statute. 

Massachusetts  National  Bank  v.  Snow,  187  Mass.  159. 

Holder.— Craig  v.  Polo  Alto  Co.,  16  Idaho  705. 

The  term  "holder  in  due  course"  should  be  construed  to  apply  only 
to  one  who  takes  the  instrument  by  negotiation  from  another  who  is 
holder.     It  should  not  include  the  person  to  whom  it  is  made  payable. 

Vander  v.  VanZuuk,  112  N.  Y.  (la.)  807;  Putnam  v.  Crimes,  36  Am. 
Dec.  250. 

Delivery. — There  is  no  doubt  that  a  delivery  of  a  note  or  other  obliga- 
tion to  one  person  in  favor  of  and  for  the  benefit  of  another,  constitutes 
a  valid  and  binding  delivery  as  against  the  party  who  delivers  it,  whether 
the  party  in  whose  favor  it  is  delivered  is  the  owner  of  it  or  not;  and  for 
the  purpose  of  protecting  his  interests,  the  law  holds  the  party  receiving 
the  delivery  as  his  trustee  and  makes  his  acceptance  of  it  the  acceptance 
of  the  beneficiary. 

Worth  V.  Case,  42  N.  Y.  362;  Wolfin  v.  Security  Bank,  170  App.  Div. 
(N.  Y.)  521. 

The  question  of  delivery  is  one  of  fact  and  each  case  must  stand  on 
its  own  facts.  To  constitute  delivery  it  must  appear  that  the  maker 
intentionally  surrendered  control  over  it,  placing  it  under  the  power  of 
the  payee  or  some  third  person  for  his  use.  Depositing  it  in  the  mail 
directed  to  some  person  makes  delivery  complete. 


4  NEGOTIABLE   INSTRUMENTS    LAW 

Digan  v.  Mandal,  167  Ind.  586;  Schovl  v.  Sheidley,  138  Mo.  672; 
Daggert  v.  Simonds,  173  Mass.  340;  Garrigue  v.  Keller,  74  N.  E.  (Ind.) 
523;  Barrett  v.  Dodge,  16  R.  I.  740;  see  Sections  34,  35. 

Indorsement. — Indorsement  is  the  signature  of  the  payee  of  a  note, 
bill  or  check,  or  that  of  a  third  person,  written  on  the  back  in  evidence 
of  his  transfer  of  it,  or  of  his  assuring  his  payment  of  it  or  both. 

Century  Dictionary. 

Written. — Writing  may  be  made  in  ink  or  pencil.  Negotiable  instru- 
ments like  any  other  contract  may  be  written  on  parchment,  cloth,  leather 
or  any  other  substitute  for  paper,  capable  of  being  transferred  from  hand 
to  hand.  They  may  be  written  in  any  language,  and  in  any  form  of 
words.  It  is  enough  if  the  words  employed  import  an  absolute  engage- 
ment to  pay  a  certain  sum  of  money.  The  signature  or  indorsement  of 
negotiable  paper  may  be  made  by  a  mark. 

Brown  V.  Butchers'  Bank,  6  Hill  443;  Acme  Coal  Co.  v.  Northrop,  146 
Pac.  593. 


GENEEAL    PROVISIONS  0 

ARTICLE  2 
General  Provisions 

Section  3.  Person  primarily  liable  on  instrument. 

4.  Reasonable  time,  what  constitutes. 

5.  Time,    how    computed;    when  last   day   falls  on 

holiday. 

6.  Application  of  chapter. 

7.  Law  merchant;  when  governs. 

§  3.  Person  primarily  liable  on  instrument.  The  person 
''primarily"  liable  on  an  instrument  is  the  person  who  by  the 
terms  of  the  instrument  is  absolutely  required  to  pay  the  same. 
All  other  parties  are  "secondarily"  liable. 

Variant. — The  Kansas  statute  omits  the  last  sentence. 


This  section  and  section  55  was  not  intended  to  prevent  the  courts 
from  determining  in  equity  all  questions  between  an  insolvent  holder  of  a 
note  and  the  one  primarily  liable  for  the  indebtedness  of  the  instrument 
as  a  matter  of  fact,  whether  maker  or  indorser. 

Building  Engineering  Co.  v.  Northern  Bank,  206  N.  Y.  400;  Winne  v. 
Winne,  166  N.  Y.  263-271. 

A  surety  is  usually  bound  with  his  principal  by  the  same  instrument, 
executed  at  the  same  time  and  on  the  same  consideration.  He  is  an 
original  promisor  and  debtor  from  the  beginning  and  is  held  ordinarily 
to  know  every  default  of  his  principal,  and  is  not  entitled  to  notice  of 
dishonor. 

Mfg.  Co.  V.  Kimmel,  87  Ind.  566;  Ballard  v.  Burton,  16  L.  R.  A.  667; 
Dan.  Neg.  Inst.  Sec.  1753. 

The  distinction  between  primary  and  secondary  liability  is  well 
stated  and  illustrated  in  Coleman  v.  Fuller,  105  N.  C.  328,  where  it  is 
said  that  a  surety  is  bound  with  his  principal  as  an  original  promisor, 
but  the  contract  of  a  guarantor  is  his  own  separate  contract  and  a  warranty 
that  what  is  promised  by  the  principal  shall  be  done  and  not  merely  an 
engagement  jointly  with  the  principal  to  do  the  thing.  The  surety's 
promise  is  to  pay  a  debt,  which  becomes  his  own  when  the  principal  fails 
to  pay. 

See  also  Hall  v.  Weaver,  34  Fed.  Rep.  104;  Hammel  v.  Beardsley, 
31  Minn.  315;  Mcintosh  v.  Reed,  89  Fed.  Rep.  466;  Kilton  v.  Tool  Co. 
22R.  I.  611. 

Liability  of  accommodation  maker. — See  notes  Sec.  201. 


6  NEGOTIABLE    INSTRUMENTS    LAW 

§  4.  Reasonable  time,  what  constitutes.  In  determining^ 
what  is  a  "reasonable  time"  or  an  "unreasonable  time" 
regard  is  to  be  had  to  the  nature  of  the  instrument,  the  usage 
of  trade  or  business  (if  any)  with  respect  to  such  instruments, 
and  the  facts  of  the  particular  case. 

The  burden  is  on  the  holder  of  a  note,  when  seeking  to  charge  an 
indorser  to  prove  due  and  timely  presentment  and  the  giving  of  notice 
to  the  indorser  of  its  dishonor;  since  the  obligation  of  the  indorser  is  con- 
ditional upon  all  the  steps  having  been  taken  by  the  holder  which  the 
statute  has  prescribed  as  to  presentment  and  as  to  notice  of  non-payment. 

Commercial  National  Bank  v.  Zimmerman,  185  N.  Y.  211. 

Ordinarily  between  drawer  and  drawee,  where  a  check  is  payable 
in  the  same  town  in  which  it  was  given,  it  should  be  presented  the  day 
of  its  receipt  or  the  next  day. 

Deshoutt  V.  Lewis,  128  App.  Div.  (N.  Y.)  131;  S.  B.  &  N.  Y.  R.  R.  Co. 
V.  Collins,  57  N.  Y.  641;  Sulsberger  &  Sons  Co.  v.  Cramer,  170  App.  Div. 
114. 

Where  demand  note  was  indorsed  to  plaintiff  three  months  and  six 
days  after  it  was  made,  the  delay  in  negotiation  was  not  for  an  "unreason- 
able length  of  time"  within  the  meaning  of  this  section,  providing  that, 
in  determining  what  is  a  reasonable  time,  regard  is  to  be  had  of  the  nature 
of  the  instrument  and  the  usage  of  trade  in  the  particiilar  case. 

Weber  v.  Hirsch,  163  N.  Y.  Supp.  1086.  See  also  German  Am. 
Bank  v.  Atwater,  165  N.  Y.  36;  Commercial  National  Bank  v.  Zimmer- 
man, 185  N.  Y.  211;  Tomlinson  Carriage  Co.  v.  Kinsella,  31  Conn.  273; 
Northwestern  Coal  Co.  v.  Bowman,  69  Iowa  153.     Notes  to  Sec.  131. 

§  5.  Time,  how  computed;  when  last  day  falls  on  holi- 
day. Where  the  day,  or  the  last  day,  for  doing  any  act 
herein  required  or  permitted  to  be  done  falls  on  Sunday  or  on 
a  holiday,  the  act  may  be  done  on  the  next  succeeding  secular 
or  business  day. 

Variant. — The  North  Carolina  statute  omits  this  section. 


As  banks  close  on  hoHdays  this  legislation  was  necessary  in  regard 
to  commercial  paper. 

Walton  v.  Stafford,  162  N.  Y.  562. 

Legal  Holidays  in  New  York.— The  first  day  of  January,  known  as 
New  Year's  day;  the  12th  day  of  February,  known  as  Lincoln's  birthday; 
the  22nd  day  of  February,  known  as  Washington's  birthday;  the  30th 


GENERAL   PROVISIONS  7 

day  of  May,  known  as  Memorial  day;  the  4th  day  of  July,  known  as 
Independence  day;  the  first  Monday  in  September,  known  as  Labor  day; 
the  12th  day  of  October,  known  as  Columbus  day;  and  the  25th  day  of 
December,  known  as  Christmas  day;  each  general  election  day  and  such 
day  appointed  by  the  president  of  the  United  States  and  governor  as  a 
day  of  general  thanksgiving.  The  term  half-holiday  includes  the  period 
from  noon  to  midnight  of  each  Saturday,  which  is  not  a  holiday.  Sec.  24 
General  Construction  Law. 

Saturday  half-holiday.— The  holder  of  a  bill  or  note  due  and  present- 
able on  Saturday  may,  if  he  so  elects,  rest  upon  the  demand  and  present- 
ment made  before  noon  of  that  day,  and  if  he  does,  notice  of  demand 
and  protest  given  on  that  day  or  the  succeeding  Monday  or  next  secular 
day,  is  good,  but  if  he  elects  to  make  demand  on  Monday  and  payment 
is  not  made,  then  he  must  in  order  to  hold  the  indorser  or  other  parties 
entitled  to  notice,  protest  and  give  notice  of  dishonor  on  that  day. 

Sylvester  v.  Crohan,  138  N.  Y.  499. 

§  6.  Application  of  chapter.  The  provisions  of  this 
chapter  do  not  apply  to  negotiable  instruments  made  and 
dehvered  prior  to  October  first,  eighteen  hundred  and  ninety- 
seven. 

Variant. — The  statutes  of  Arizona  and  Florida  omit  this  section. 
The  Minnesota  statute  adds:  "Nor  shall  they  be  construed  as  modifying, 
repealing  or  superseding  any  of  the  terms  and  provisions  of  Section  2747, 
Revised  Laws  1905."  The  South  Dakota  statute  reads:  "Nothing  in  this 
act  contained  shall  be  construed  as  in  any  manner  repealing  Chapters 
128,  140  and  141  of  the  Laws  of  1905  and  Chapter  74  of  the  Laws  of  1907." 


Indorsed  after  Law,  effect  of  paper  made  before  see, 
Gate  City  National  Bank  v.  Schmidt,  168  Mo.  App.  153;  Mackintosh 
v.  Gibbs,  81  N.  J.  L.  37. 

§  7.  Law  merchant;  when  governs.  In  any  case  not 
provided  for  in  this  chapter  the  rules  of  the  law  merchant  shall 
govern. 

Chancellor  Kent  defines  the  rules  of  the  law  merchant  to  be  "a  system 
of  law,  wliich  does  not  rest  essentially  on  the  positive  institutions  and 
local  customs  of  any  particular  country,  but  consists  of  certain  principles 
of  equity  and  usages  of  trade,  which  general  convenience  and  a  common 
sense  of  justice  have  established  to  regulate  the  dealings  of  merchants  and 
mariners  in  all  the  commercial  countries  of  the  civilized  world." 


8  NEGOTIABLE   INSTRUMENTS   LAW 

All  matters  bearing  upon  the  execution,  the  interpretation,  and  the 
validity  of  contracts,  including  the  capacity  of  the  parties  to  contract 
thereto,  are  determined  by  the  law  of  the  place  where  the  contract  is  made. 
All  matters  connected  with  its  performance,  including  presentation, 
notice,  demand,  etc.,  are  regulated  by  the  law  of  the  place  where  the 
contract,  by  its  terms,  is  to  be  performed.  All  matters  respecting  the 
remedy  to  be  piirsued  including  the  bringing  of  suits  and  the  service  of 
process,  depend  upon  the  law  of  the  place  where  the  action  is  brought. 

Scudder  v.  Bank,  91  U.  S.  406. 


FORM    AND   INTERPRETATION 


ARTICLE  3 
Form  and  Interpretation 

Section  20.  Form  of  negotiable  instrtiment. 

21.  Certainty  as  to  sum;  what  constitutes. 

22.  When  promise  is  unconditional. 

23.  Determinable  future  time;  what  constitutes. 

24.  Additional  provisions  not  affecting  negotiability. 

25.  Omissions;  seal;  particular  money. 

26.  When  payable  on  demand. 

27.  When  payable  to  order. 

28.  When  payable  to  bearer. 

29.  Terms,  when  sufficient. 

30.  Date,  presumption  as  to. 

3 1 .  Ante-dated  and  post-dated. 

32.  When  date  may  be  inserted. 

33.  Blanks;  when  may  be  filled. 

34.  Incomplete  instrument  not  delivered. 

35.  Delivery;  when  effectual;  when  presumed. 

36.  Construction  where  instrument  is  ambiguous. 

37.  Liability  of  person  signing  in  trade  or  assumed 

name. 

38.  Signature  by  agent;  authority;  how  shown. 

39.  Liability  of  person  signing  as  agent. 

40.  Signature  by  procuration ;  effect  of. 

41.  Effect  of  indorsement  by  infant  or  corporation. 

42.  Forged  signature;  effect  of. 

§  20.  Form  of  negotiable  instrument.     An  instrument 
to  be  negotiable  must  conform  to  the  following  requirements: 

1 .  It  must  be  in  writing  and  signed  by  the  maker  or 
drawer ; 

2.  Must  contain  an  unconditional  promise  or  order  to  pay 
a  sum  certain  in  money ; 

3.  Must  be  payable  on  demand,  or  at  a  fixed  or  determin- 
able future  time ; 

4.  Must  be  payable  to  order  or  to  bearer;  and 


10  NEGOTIABLE    INSTRUMENTS    LAW 

5.  Where  the  instrument  is  addressed  to  a  drawee,  he 
must  be  named  or  otherwise  indicated  therein  with  reasonable 
certainty. 

Variant. — The  statutes  of  Arizona,  Idaho,  Kentucky,  North  CaroHna 
and  Wyoming  add  the  words:  "of  a  specified  person"  after  the  word 
"order"  in  subdivision  4.  The  Wisconsin  statute  the  following  is  added 
to  subdivision  5:  "But  no  order  drawn  upon  or  accepted  by  the  treasurer 
of  any  county,  town,  city,  village  or  school  district,  whether  drawn  by  any 
officer  thereof  or  any  other  person,  and  no  obligation  nor  instrument  made 
by  any  such  corporation,  or  any  officer  thereof,  unless  expressly  authorized 
by  law  to  be  made  negotiable,  shall  be,  or  shall  be  deemed  to  be,  negotiable 
according  to  the  custom  of  merchants,  in  whatever  form  they  may  be 
drawn  or  made.  Warehouse  receipts,  bills  of  lading  and  railroad  receipts 
upon  the  face  of  which  the  words,  "not  negotiable"  shall  be  plainly  written, 
printed  or  stamped,  shall  be  negotiable  as  provided  in  Section  1676  of 
the  Wisconsin  statutes  of  1878  and  in  Sections  4194  and  4425  of  these 
statutes,  as  the  same  have  been  construed  by  the  Supreme  Court." 


The  character  of  an  instrument  cannot  be  affected  by  what  the 
parties  may  choose  to  call  it  in  their  pleadings  or  otherwise,  whether  the 
paper  is  a  bill,  note,  check  or  what  not  is  to  be  determined  by  the  court 
from  the  writing  thereof. 

Buisenthall  v.  WilHams,  85  Am.  Dec.  629. 

Negotiable  is  a  term  applied  to  a  contract,  the  right  of  action  of  which 
is  capable  of  being  transferred  by  indorsement  (of  which  delivery  is  an 
essential  part)  in  case  the  undertaking  is  to  A,  or  his  order.  A,  or  his  agent, 
or  the  like,  or,  by  delivery  alone,  in  case  the  undertaking  is  to  A,  or  bearer, 
the  assignee  in  either  case  having  a  right  to  sue  in  his  own  name  with  all 
the  rights  of  the  assignor. 

Bills  of  exchange,  promissory  notes,  government,  state,  county, 
township,  district,  mtmicipal  and  corporate  bonds,  and  bank  notes,  to 
order  or  bearer,  are  universally  negotiable;  and  bills  of  lading,  and  notes 
not  to  order  or  bearer,  are  quasi  negotiable;  that  is,  an  indorsement  will 
give  a  right  of  action  in  the  name  of  the  assignee. 

Whether  a  written  instrument  is  negotiable  must  be  determined 
from  the  writing  itself  and  cannot  depend  on  extrinsic  facts. 

Equitable  Trust  Co.  v.  Harger,  258  111.  615;  102  N.  E.  209. 

Subd.  I.     The  word  writing  includes  print.     Sec.  2,  ante. 
The  material  on  which  the  writing  or  printing  is  made  is  immaterial 
and  may  be  written  on  paper,  wood,  stone  or  metal. 
Danl.  Neg.  Inst.  Sec.  77. 


FORM    AND    INTEEPEETATION  11 

The  writing  may  be  with  ink  or  pencil. 

Brown  v.  Butchers'  Bank,  6  Hill  443.  Reed  v.  Roark,  14  Tex.  329; 
65  Am.  Dec.  127. 

The  signature  need  not  necessarily  be  the  full  name.  Signature 
by  initials  or  b}^  mark  are  sufficient,  provided  it  be  used  as  a  substitute 
and  he  intends  to  be  bound  by  it. 

Dewit  V.  Wilson,  9  N.  Y.  574;  Brown  v.  Butchers'  Bank,  6  Hill  433; 
Merchants'  Bank  v.  Spicer,  6  Wend'.  443. 

The  place  of  signature  on  the  instrument  is  immaterial  provided 
it  is  signed  with  the  intent  to  become  maker  or  drawer. 

Palmer  v.  Stephens,  1  Denio  471;  Zerin  v.  Sterne,  71  Am.  Dec.  204, 
474;  Olcott  v.  Little,  32  Am.  Dec.  (N.  H.)  357. 

A  rubber  stamp  indorsement  is  valid  when  made  by  one  having 
authority. 

Mayers  v.  McRimmon  (N.  C),  53  S.  E.  447;  Robl  v.  Pennsylvania 
Co.  (Pa.),40  Atl.  969. 

Signature  to  a  check  by  a  bank  depositor  by  mark  in  lead  pencil  is 
valid. 

Drefahl  v.  Security  Savings  Bank,  107  N.  W.  (la.)  179. 

A  deposit  in  the  name  of  one  person  "or"  another  is  a  deposit  in  the 
name  of  both,  the  same  as  if  the  word  "and"  had  been  used. 

Clary  v.  Fitzgerald,  155  App.  Div.  659. 

By  Section  144  of  the  Banking  Law  of  New  York  (Consol.  Laws, 
Chap.  2;  Laws  of  1909,  Chap.  10),  it  is  among  other  things  provided  as 
follows:  "When  a  deposit  shall  be  made  by  any  person  in  the  names  of 
such  depositor  and  another  person  and  in  form  to  be  paid  to  either  or  the 
survivor  of  them,  such  deposit  thereupon  and  any  additions  thereto  made 
by  either  of  such  persons  upon  the  making  thereof  shall  become  the 
property  of  such  persons  as  joint  tenants  and  the  same  together  with 
all  interest  thereon  shall  be  held  for  the  exclusive  use  of  the  persons  so 
named  and  may  be  paid  to  either  during  the  lifetime  of  both  or  to  the 
survivor  after  the  death  of  one  of  them,  and  such  payment  and  the  receipt 
or  acqmttance  of  the  one  to  whom  such  payment  is  made  shall  be  a  valid 
and  sufficient  release  and  discharge  to  said  bank  for  all  payments  made  on 
account  of  such  deposit  prior  to  the  receipt  by  said  bank  of  notice  in 
writing  not  to  pay  such  deposit  in  accordance  with  the  terms  thereof." 

Equivalent  statutory  provisions  were  in  1909  adopted  in  California 
(Stats,  and  Amdts.  of  1909,  Chap.  76,  Section  16)  and  Michigan  (PubHc 
Acts  of  1909,  No.  248,  Section  3). 

The  law  recognizes  a  joint  tenancy  in  personal  property,  irrespective 
of  whether  the  tenants  be  husband  and  wife,  and  where  there  is  a  joint 
tenancy  the  right  of  survivorship  exists. 


12  NEGOTIABLE   INSTRUMENTS   LAW 

West  V.  McCullough,  123  App.  Div.  846,  108  N.  Y.  Supp.  493, 
affirmed  194  N.  Y.  518,  87  N.  E.  1130,  citing  Farrelly  v.  Emigrant  In- 
dustrial Savings  Bank,  92  App.  Div.  529,  87  N.  Y.  Supp.  54,  and  Kelly  v. 
Home  Savings  Bank,  103  App.  Div.  141,  92  N.  Y.  Supp.  578;  In  re  Rey- 
nolds Estate,  163  N.  Y.  Supp.  803. 

FORM  FOR  OPENING  ''EITHER  OR  SURVIVOR"  ACCOUNT 

We,  John  Rogers  and  Helen  Rogers,  do  hereby  open  an  account  with  the 

Bank,    and   do    hereby    authorize,, 

empower    and   direct   the Bank    to 

open  an  account  with  us  in  the  name  of  ''John  Rogers  and  Helen  Rogers" 
payable  to  either  or  the  survivor,  or  under  such  other  designation  as  said 
bank  may  employ;  and  we,  the  said  John  Rogers  and  Helen  Rogers,  do  hereby 
agree  with  each  other  to  become  and  be  co-partners  in  the  ownership  of  said 
moneys  and  all  accrued  and  accruing  interest  thereon  and  of  all  moneys 
hereafter  to  be  deposited  to  the  said  account.  And  it  is  agreed  that  each  and 
either  of  said  parties  and  the  survivor  of  them  may  at  any  and  all  times  draw 
and  receive  from  said  bank  the  whole  or  any  part  of  said  moneys  and  accumu- 
lated interest;  and  each  of  said  parties  is  authorized  and  empowered  to  sign 
the  name  of  the  other  to  any  receipt,  check,  draft  or  other  voucher  for  the  moneys 
so  drawn. 


Subd.  2.  A  simple  I.  O.  U.  is  not  usually  a  promissory  note  unless 
those  words  are  added  showing  it  to  be  absolutely  payable. 

Gay  V.  Rooke,  151  Mass.  115. 

An  instniment  worded  "Due  A  $100,  payable  on  demand"  and  signed 
is  a  promissory  note. 

Kimball  v.  Huntington,  10  Wend.  675. 

A  savings  bank  pass  book  is  not  negotiable  paper,  and  its  possession 
constitutes  in  itself  no  evidence  of  a  right  to  draw  money  thereon. 

White  V.  Gushing,  88  Me.  339;  Grawford  v.  West  Side  Bank,  100 
N.  Y.  51;  Smith  v.  Brooklyn  Savings  Bank,  101  N.  Y.  60;  Iron  Gity  Bank 
V.  McGord,  139  Pa.  St.  52. 

A  paper  reading  "As  per  verbal  agreement  we  hereby  agree  to  pay 
you  $1,000  ninety  days  from  date,  this  amount  to  be  paid  out  on  our 
profits  on  job,"  not  being  an  unconditional  promise  or  order  to  pay  a 
simi  certain  in  money,  and  not  being  payable  to  bearer  or  order  is  not  a 
negotiable  instrument. 

Fulton  V.  Varney,  117  App.  Div.  572. 


FOBM   Al^D   INTERPKETATION  13 

A  certificate  of  deposit  issued  by  a  bank  whereby  it  agrees  to  pay  to  the 
person  named  therein  "or  her  assigns"  a  certain  sum  of  money  is  not  a 
negotiable  instnmient  within  the  meaning  of  this  section. 

Zander  v.  N.  Y.  Security  &  Trust  Co.,  178  N.  Y.  208. 

A  certificate  of  deposit  payable  to  the  order  of  the  depositor,  in 
current  bank  notes,  was  held  negotiable. 

Pardee  v.  Fish,  60  N.  Y.  265. 

A  note  is  not  rendered  non-negotiable  by  the  fact  that  it  provides 
for  a  discount,  providing  it  is  paid  before  maturity. 

Farmers'  Trust  Co.  v.  Planck,  (Neb.)  152  N.  W.  390. 

In  Loring  v.  Anderson,  95  Minn.  101,  103  N.  W.  722,  it  is  held  that 
a  note  providing  for  a  discoimt  of  6  per  cent.,  if  the  debt  is  paid  on  or 
before  naturity,  does  not  make  the  instrument  non-negotiable,  as  the 
amount  of  the  deduction  is  readily  ascertainable  from  the  face  of  the  paper. 

As  to  what  constitutes  money.— In  most  of  the  states  it  is  held  that 
bills  payable  in  merchandise  or  anything  but  money  are  not  good  bills 
of  exchange,  but  the  cases  are  not  agreed  in  all  respects  as  to  what  shall 
be  deemed  as  money. 

In  Klauber  v.  Biggerstaff,  47  Wis.  551,  the  court  defining  money 
said,  "Money  is  a  generic  and  comprehensive  term.  It  is  not  a  synonym 
of  coin.  It  includes  coin,  but  is  not  confined  to  it.  It  includes  whatever 
is  lawfully  and  actually  current  in  buying  and  selling,  of  the  value  and  the 
equivalent  of  coin.  By  universal  consent,  under  the  sanction  of  all 
courts,  everywhere,  or  almost  everywhere,  bank  notes  lawfully  issued, 
actually  current  at  par  in  lieu  of  coin,  are  money.  The  common  term 
paper  money  is  in  a  legal  sense  quite  as  accurate  as  the  term  coined  money." 

The  general  rule  is  that  the  term  "currency"  and  "current  funds" 
when  used  as  the  expression  of  the  medium  of  payment  should  be  con- 
strued to  mean  current  money,  when  thus  construed  an  instrument 
payable  in  currency  or  current  fimds  is  in  this  respect  negotiable. 

Bank  of  Dexter,  94  Me.  348;  Howe  v.  Hartness,  11  Ohio  St.  449; 
Black  V.  Ward,  27  Mich.  191. 

Where  a  bill  was  drawn  in  Montreal  on  a  business  firm  in  Whitehall, 
payable  in  New  York  City  in  gold  dollars,  it  was  held  to  be  a  negotiable 
instniment  upon  the  ground  that  at  the  time  (1870)  there  were  two  kinds 
of  lawful  money  in  use  under  Acts  of  Congress,  and  as  gold  and  silver 
were  recognized  as  money  current  in  business  and  as  legal  tender  by  the 
statute,  it  was  decided  that  a  person  might  be  permitted  to  select  that 
description  of  money  recognized  by  law  without  destroying  the  negoti- 
ability of  the  instnmient. 

Crystler  v.  Renois,  43  N.  Y.  209;  Van  Alstyne  v.  Sorley,  32  Texas  518. 


14  NEGOTIABLE    INSTRUMENTS    LAW 

In  Michigan  a  note  payable  in  "Canada  currency"  was  held  to  be 
negotiable. 

Black  V.  Ward,  27  Mich.  193;  15  Am.  Rep.  162. 

In  Texas  a  note  payable  in  "Mexican  silver  dollars"  was  held  to  be 
negotiable. 

Hogus  V.  Williamson,  85  Texas  553,  reported  with  notes  in  20  L.  R.  A. 
481. 

In  order  to  be  negotiable  a  promissory  note  must  be  payable  either 
in  specie  or  funds  which  the  court  can  judicially  notice  as  equivalent 
here  for  money.  Held  therefore  that  a  note  payable  in  "Canada  money" 
was  not  negotiable. 

Thompson  v.  Sloan,  23  Wend.  71 ;  also  see  Jones  v.  Fales,  4  Mass.  245, 

The  words  "as  per  contract"  written  on  the  back  of  a  note  at  the 
time  of  its  execution,  under  which  the  payee  indorses  at  the  time  of  the 
negotiation,  do  not  affect  the  negotiability  of  the  note. 

Snelling  State  Bank  v.  Clasen,  (Minn.)  157  N.  W.  643;  First  National 
Bank  v.  Lightner,  74  Kan.  736;  118  Am.  St.  Rep.  353. 

"New  York  or  Chicago  exchange"  are  negotiable. 

Security  Trust  Co.  v.  Des  Moines  Co.,  198  Fed.  331. 

The  Coiu-ts  however,  are  not  unanimous  and  the  safer  rule  to  adopt 
for  the  bank  where  such  note  is  offered  for  discount,  is  to  proceed  on  the 
theory  that  it  might  be  held  non-negotiable. 

See  Chandler  v.  Calvert,  87  Mo.  App.  362;  Hogue  v.  Edwards,  9 
111.  App.  153. 

The  following  are  illustrations  of  provisions  which  have  been  held 
not  to  render  the  instrument  objectionable  on  the  ground  of  uncertainty 
as  to  amount. 

A  discount  of  6%  will  be  given  if  the  full  amount  of  this  instnmient 
is  paid  at  maturity  of  the  first  installment. 

Harrison  v.  Hunter,  Tex.  168  S.  W.  Rep.  1036. 

A  discount  of  6%  will  be  allowed  if  paid  in  full  within  fifteen  days 
from  date.     Installments  after  maturity  draw  6  per  cent,  interest. 

First  National  Bank  v.  Watson,  Okla.,  155  Pac.  Rep.  1152. 

With  interest  at  eight  per  cent,  payable  annually  from  November 
1,  1905,  until  paid.  Interest  from  date  if  not  paid  when  due.  (Note 
dated  May,  1905;  payable  November  1,  1905.) 

Security  Trust  &  Savings  Bank  v.  Gleichman,  Okla.,  150  Pac.  Rep.  908. 

Non-payment  of  any  installment  for  more  than  thirty  days  after 
maturity  renders  remaining  installments  due  at  holder's  option. 

Harrison  v.  Hunter,  Texas,  168  S.  W.  Rep.  1036. 

If  default  is  made  in  the  payment  of  any  note  or  the  machine  is 
levied  upon  or  undersigned  attempts  to  sell  or  remove  the  same,  said 


FORM    AND    INTERPEETATION  15 

company  may  declare  all  the  notes  due.     (Series  of  notes  for  threshing 
machine.) 

Schmidt  v.  Pegg.,  137  N.  W.  524. 

If  suit  is  begun  judgment  may  be  taken  for  an  additional  $15.00 
and  ten  per  cent,  of  the  amotmt  due  for  attorney's  fees. 
Seton  V.  Exchange  Bank,  Okla.,  150  Pac.  Rep.  1079. 


\J^^Luy  i^/^^ny^^^u,^  a^M^      ><ic:^.     ''*^/oo      ^M/?^4/i/ 


This  check  is  drawn  on  a  special  fund  and  is  not  as  required  by  Sec.  20, 
Subd.  2  for  "a  certain  sum  of  money"  and  is  therefore  non-negotiable. 
The  courts  in  all  the  states,  as  well  as  the  statute  (Section  22)  make  it 
entirely  clear  that  the  mere  indication  of  a  particular  fund  from  which 
the  maker  of  an  instnmient  may  reimburse  himself,  or  a  mere  reference 
to  a  specified  account  which  is  to  be  debited  with  the  amount  called  for 
by  the  instrument,  does  not  affect  its  unconditionality,andit  is  only  where 
the  order  or  promise  is  only  to  pay  out  of  a  particular  fund  that  it  is  con- 
sidered conditional  in  such  a  sense  as  to  destroy  the  negotiability  of  the 
instrument. 

Hibbs  V.  Brown,  190  N.  Y.  195;  Brill  v.  Tuttle,  81  N.  Y.  454;  Ehricks 
V.  De  Mill,  75  N.  Y.  370;  Alger  v.  Scott,  54  N.  Y.  14;  Parker  v.  City  of 
Syracuse,  31  N.  Y.  376. 

Subd.  3.  An  option  to  declare  the  principal  due  upon  default  in  pay- 
ment of  interest  does  not  affect  the  negotiable  character  of  the  instrument. 

Bank  v.  Garland,  160  111.  App.  407. 

In  Leader  v.  Plants,  95  Me.  339,  a  promissory  note  was  made  payable 
"within  one  year  after  date"  and  it  was  held  to  be  negotiable;  that  the 
option  to  pay  did  not  destroy  its  negotiability. 

See  also  Bowie  v.  Hume,  13  App.  D.  C.  286;  Louisville  Banking  Co. 
V.  Gray,  123  Ala.  251;  Ackley  School  v.  Hall,  113  U.  S.  135;  Mattison  v. 
Marks,  31  Mich.  421.     But  see  Mahoney  v.  Fitzpatrick,  133  Mass.  151. 

In  Cunningham  v.  McDonald,  98  Texas  316,  it  was  held,  "A  promis- 
sory note  is  not  rendered  negotiable  by  the  fact  that  the  maker,  promising 


16  NEGOTIABLE    INSTRUMENTS   LAW 

to  pay  by  a  day  certain,  reserves  to  himself  by  its  terms  the  right  to  pay 
sooner." 

A  note  payable  when  dividends  shall  be  declared  is  not  negotiable. 

Brocks  V.  Hargreaves,  21  Mich.  254.  Or  from  profits  of  machines 
when  sold.  Benedict  v.  Cowden,  49  N.  Y.  396.  Or  when  mill  is  sold. 
Blake  v.  Coleman,  22  Wis.  415. 

A  note  containing  the  provision  "It  is  understood  that  this  note  will 
be  renewed  at  maturity"  renders  the  time  of  payment  uncertain. 

Citizens  Bank  v.  Piollet,  126  Pa.  St.  192.  But  in  Witty  v.  Mutual 
Insurance  Co.  123  Ind.  411,  containing  a  similar  provision,  was  held  to  be 
negotiable. 

A  note  payable  ninety  days  after  date,  which  contains  the  following 
stipulation,  "This  note  is  payable  when  Post  Office  Department  accepts 
my  building  for  me,"  is  not  negotiable. 

Devine  v.  Price,  152  N.  Y.  Supp.  321. 

A  note  providing  that  the  payee  may  declare  it  due  at  any  time  he 
deems  it  to  be  insecure  is  non-negotiable. 

Reynolds  v.  Vint,  Oregon,  144  Pac.  Rep.  526. 

A  note  payable  six  months  after  the  maker's  death  is  negotiable. 

Deeter  v.  Burk,  107  N.  E.  Rep.  304. 


Subd.  4.  Bonds  issued  by  a  joint  stock  association  payable  to  bearer, 
unless  the  holder  prefers  to  have  them  registered,  in  which  case  they  are 
not  to  be  transferred  except  on  the  books  of  the  company,  and  also 
coupons  attached  thereto  payable  to  bearer,  are  negotiable. 

Hibbs  V.  Brown,  112  App.  Div.  (N.  Y.)  214. 

"Holder"  is  of  the  same  import  as  "bearer"  and  a  note  payable  to  a 
specified  person  or  "holder"  is  negotiable  the  same  as  if  "bearer"  had 
been  used. 

Putnam  v.  Crimes,  36  Am.  Dec.  250. 

$4,192.50.  Zanesville,  Ohio,  February  12,  1907. 

"Four  months  after  date  we  or  either  of  us  promise  to  pay  to  the 
Old  Citizens'  National  Bank  of  Zanesville,  Ohio,  four  thousand  one 
hundred  ninety-two  and  50/100  dollars,  value  received,  payable  at  said 
bank  with  interest  at  6  per  cent,  per  annum." 

J.  E.  Blackburn, 
Elmer  Dover, 
No.  17319.     Due  June  12.  J.  B.  Owens. 

The  foregoing  note  not  being  payable  to  bearer  or  order,  is  non- 
negotiable.     (Kerr  v.  Smith,  156  App.  Div.  807,  142  N.  Y.  Supp,  57; 


FORM   AND   INTEEPEETATION  17 

National  Citizens'  Bank  v.  Toplitz,  178  N.  Y.  464,  71  N.  E.  1),  and  there 
would  therefore  be  no  presumption  of  consideration;  but  the  recital 
"value  received,"  in  the  body  of  the  note,  constitutes  an  admission  that 
the  instnmient  was  issued  for  a  sufficient  consideration  (Prindle  v.  Caru- 
thers,  15  N.  Y.  425;  Hamilton  v.  Hamilton,  127  App.  Div.  871,  112  N.  Y. 
Supp.  10,  cited  with  approval  in  National  Citizens'  Bank  v.  Toplitz,  178 
N.  Y.  464,  71  N.  E.  1). 

The  three  makers  in  the  foregoing  note  were  liable  to  the  payee  both 
jointly  and  severally,  but  presumptively  as  between  themselves,  their 
liability  was  joint,  and  equity  requires  that  they  bear  the  burden  equally, 
and  that  those  who  have  not  paid  shall  contribute  to  the  plaintiff,  who 
has  been  obliged  to  pay  the  entire  amount  for  which  all  three  makers 
were  liable. 

Aspinwall  v.  Sacchi,  57  N.  Y.  331;  Hard  v.  Mingle,  141  App.  Div. 
(N.)  170,  affirmed  206  N.  Y.  179;  Dillenbeck  v.  Dygert,  97  N.  Y.  303; 
McCready  v.  Van  Antwerp,  24  Hun.  322,  51  App.  Div.  (N.  Y.)  616; 
Owens  V.  Blackburn,  146  N.  Y.  Supp.  966. 

An  agreement  made  between  two  persons  or  where  one  agrees  to 
pay  the  other  a  certain  sum  of  money  is  not  payable  to  order  or  to  bearer 
as  required  in  this  section. 

Fulton  V.  Vamey,  117  App.  Div.  (N.  Y.)  572;  Owen  v.  Blackburn, 
161  App.  Div.  (N.  Y.)  827;  Backus  v.  Danforth,  10  Conn.  297;  Gilley  v. 
Harrell,  118  Tenn.  115. 

An  instrument  by  which  the  signer  agrees  to  pay  a  specified  sum 
of  money  at  a  time  and  place  named,  but  not  stating  that  it  is  to  be  paid 
to  any  person  or  bearer,  is  not  negotiable  and  the  indorser  cannot  be  sued 
upon  it  as  such. 

Hilbom  V.  Pennsylvania  Cement  Co.,  145  App.  Div.  442. 

"One  day  after  death  for  value  received        promise  to  pay 

to  S.  J.  Porter  the  sum  of  $318  and  attorneys'  fees,  negotiable  and  payable 
at  the  Union  Bank  of  Tipton,  Indiana,  with  interest  at  the  rate  of  6  per 
cent,  per  annum  from  date  imtil  paid." 

This  instrument  must  be  held  to  be  a  negotiable  note.  If  a  note 
does  not  contain  the  words  "or  order,"  or  "or  bearer"  or  other  like  words 
of  negotiability,  it  is  non-negotiable.  (Tiedeman  Commercial  Paper,  21; 
Maule  V.  Crawford,  14  Hun  (N.  Y.)  193;  Hackney  v.  Jones,  3  Hump. 
(Tenn.)  612.)  But  if  it  contains  words  which  clearly  show  that  it  was 
intended  to  be  negotiable,  it  is  not  necessary  that  the  words  "order"  or 
"bearer"  be  used.     It  is  clearly  stated  that  this  note  shall  be  "negotiable 


18  NEGOTIABLE    INSTRUMENTS   LAW 

and  payable  at  the  Union  Bank  at  Tipton,  Indiana,"  and  therefore  it  must 
be  held  to  be  a  negotiable  instrument.     (Tiedeman,  Commercial  Paper, 
Sec.  21 ;  Raymond  v.  Middleton,  29  Pa.  530.) 
Essig  V.  Porter.  (Ind.)  112  N.  E.  1005. 

Order  on  savings  bank,  when  non-negotiable. 

Smith  V.  Brooklyn  Savings  Bank,  loi  N.  Y.  58;  White  v.  Gushing, 
51  Am.  St.  Rep.  402. 

The  absence  of  the  words  "order"  or  "bearer"  does  not  render  the 
paper  non-transferable  or  non-assignable.  Their  effect  is  to  make  it 
negotiable  and  cut  off  defenses  against  bona  fide  holders. 

Mackin  v.  Blalock,  133  Ga.  550;  66  S.  E.  Rep.  265. 

A  negotiable  instrument  need  not  be  drawn  payable  to  any  named 
individual,  but  may  be  payable  to  bearer  generally.  The  indorsement 
by  the  holder  of  such  paper  is  not  necessary. 

Mcintosh  V.  Little,  26  Minn.  336.  See  also  notes  to  Sees.  23,  27 
and  28;  Equitable  Trust  Go.  of  N.  Y.  v.  Were,  74  Misc.  469;  Hilbom  v. 
Pennsylvania  Gement  Go.,  145  App.  Div.  (N.  Y.)  443;  Equitable  Trust 
Co.  V.  Taylor,  146  App.  Div.  (N.  Y.)  424;  Gilbert  v.  Adams,  146  App. 
Div.  (N.  Y.)  864;  Maule  v.  Crawford,  14  Hun.  (N.  Y.)  193;  Raymond 
V.  Middleton,  29  Pa.  530. 


For  Counter  Use  Only 

St.  Lo  u  I ».. 0^<^^^    /^1_. 1 9 1  ^ 

The  National  Bank  dF  Commerce  <n  St.  Louis  4-26 

Pay  TO  Myself  Ohiy  AND  Charge  to  My  Account, 

The  RtCClPT  OF  WH^A  IS  n£«C8Y'ACKN0 

Not  NEGOTiA&t.e 


This  check  by  its  terms  is  payable  to  the  maker  only  and  not  payable 
to  bearer  or  order.  The  National  Bank  of  Gommerce  can  pay  the  pro- 
ceeds to  Redfem.     It  not  being  payable  to  order  or  bearer  is  not  negotiable. 

Kinsella  v.  Lockwood,  79  Misc.  619. 

§  21.  Certainty  as  to  sum;  what  constitutes.     The  sum 

payable  is  a  sum  certain  within  the  meaning  of  this  chapter 
although  it  is  to  be  paid : 

1.  With  interest;  or 

2.  By  stated  instalments;  or 

3.  By  stated  instalments,   with  a  provision  that  upon 


FORM   AND   INTERPRETATION  19 

default  in  payment  of  any  instalment  or  of  interest,  the  whole 
shall  become  due;  or 

4.  With  exchange,   whether  at  a  fixed  rate  or  at  the 
current  rate;  or 

5.  With  costs  of  collection  or  an  attorney's  fee,  in  case 
payment  shall  not  be  made  at  maturity. 

Variant. — The  statutes  of  Iowa,  Idaho,  North  CaroHna  and  Wyoming 
omit  the  words  "or  of  interest"  in  Subd,  3.  The  Nebraska  statute  adds 
a  proviso  to  Subd.  5  as  follows:  "Provided  that  nothing  herein  contained 
shall  be  construed  to  authorize  any  court  to  include  in  any  judgment  or 
an  instrument  made  in  this  state  any  sum  for  attorney's  fees  or  other 
costs."  The  North  Carolina  statute  adds  an  additional  subdivision  as 
follows:  "Nothing  in  this  chapter  shall  authorize  the  enforcement  of  an 
authorization  to  confess  judgment  or  a  waiver  of  a  homestead  and  personal 
property  exemptions  or  a  provision  to  pay  counsel  fees  for  collection 
incorporated  in  any  of  the  instruments  mentioned  in  this  chapter;  but 
the  mention  of  such  provision  in  such  instrument  shall  not  affect  the  other 
terms  of  such  instnmients  or  the  negotiability  thereof."  The  South 
Dakota  statute  substitutes  the  following  for  Subd.  5:  "Provided  that 
nothing  herein  contained  shall  be  construed  to  authorize  any  coiirt  to 
include  in  any  judgment  or  an  instrument  made  in  this  state  any  sum  for 
attorney's  fees,  or  other  costs  now  taxable  by  law." 

Subd.  I.  Agreement  to  pay  interest  is  a  mere  incident  and  does 
not  affect  the  negotiability  of  the  instrument. 

President,  etc.  v.  Hurtin,  9  Johns  217;  Baumlister  v.  Kuntz,  53 
Fla.  340;  Dinsmore  v.  Duncan,  57  N.  Y.  573. 

Subds.  2-3.  The  negotiability  of  notes  payable  by  installment  has 
been  well  established. 

Goshen,  etc.  v.  Hinton,  9  Johns,  217;  Wright  v.  Irwin,  33  Mich.  32; 
Bright  V.  Offield,  81  Wash.  442;  Hodge  v.  Wallace,  129  Wis.  84. 

Subd.  4. — This  section  settles  all  doubt  as  to  this  much  mooted 
question. 

Second  National  Bank  v.  Basuier,  65  Fed.  Rep.  58;  Pardee  v.  Fish, 
60  N.  Y.  265;  Whittle  v.  National  Bank,  26  S.  W.  Rep.  1106. 

Subd.  5. — The  rule  that  a  stipulation  for  attorney's  fees  does  not 
effect  the  negotiability  of  the  instrument  containing  it  is  a  much  mooted 
question.  In  the  case  of  Raleigh  County  Bank  v.  Poteet,  L.  R.  A.  1915  B, 
928  gives  a  general  review  of  the  decisions  of  all  the  states  upon  this 
subject  and  contains  a  statement  of  the  reasons  given  by  the  various 
courts  in  upholding  and  rejecting  the  provision.     In  the  case  of  Boozer  v. 


20  NEGOTIABLE    INSTRUMENTS   LAW 

Anderson,  42  Ark.  167,  it  was  said  that  the  provision  for  payment  of 
attorney's  fees  was  an  agreement  for  a  penalty,  and  that  the  courts  of 
that  state  would  not  enforce  it.  The  same  rule  has  been  reaffirmed  in 
subsequent  cases  of  Arden  Lumber  Co.  v.  Henderson,  83  Ark.  244,  103 
S.  W.  185,  and  White  Co.  Egelhoflf,  96  Ark.  105,  131  S.  W.  208. 

See  also.  First  National  Bank  v.  Fleitmann,  168  App.  Div.  (N.  Y.) 
75;  Dorsey  v.  Wolff,  142  111.  589;  Stoneman  v.  Pyle,  35  Ind.  103;  Shenan- 
doah Bank  v.  Marsh,  89  Iowa  173;  Bowie  v.  Hall,  1  L.  R.  A.  546;  Jones  v. 
Rodetz,  27  Minn.  240;  First  National  Bank  v.  Gay,  63  Mo.  38;  Woods  v. 
North,  84  Pa.  St.  410;  National  Bank  v.  Sutton,  6  U.  S.  App.  312;  Farmers' 
National  Bank  v.  Sutton,  6  U.  S.  App.  331. 

§  22.  When  promise  is  unconditional.  An  unqualified 
order  or  promise  to  pay  is  unconditional  within  the  meaning 
of  this  chapter,  though  coupled  with  : 

1 .  An  indication  of  a  particular  fund  out  of  which  reim- 
bursement is  to  be  made,  or  a  particular  account  to  be  debited 
with  the  amount ;  or 

2.  A  statement  of  the  transaction  which  gives  rise  to  the 
instrument. 

But  an  order  or  promise  to  pay  out  of  a  particular  fund  is 
not  unconditional. 

This  section  defining  an  unconditional  promise  to  pay  embodies 
the  rules  of  common  law  and  law  merchant  as  they  have  been  established 
before  the  enactment  of  the  statute. 

Subd.  I.— In  Lowery  v.  Steward,  25  N.  Y.  239,  the  order  read, 
"Please  pay  to  the  order  of  Archibold  H.  Lowery  the  simi  of  $500,  on 
accoimt  of  24  bales  of  cotton  shipped  to  you  as  per  bill  of  lading  by  steamer 
Colorado,  inclosed  to  you  in  letter." 

In  Parker  v.  City  of  Syracuse,  31  N.  Y.  376,  the  order  was  drawn 
on  the  comptroller  of  the  city  as  follows:  "Pay  Parker  &  Wright  $1,400 
on  plank  road  and  sidewalk  account  and  charge  to  my  account.  A.  L. 
Schofield." 

In  Alger  v.  Scott,  54  N.  Y.  14,  the  order  was  drawn  by  a  landlord 
upon  his  tenant  in  the  following  terms:  "Please  pay  John  R.  Glover 
$346.69  and  charge  same  to  me,  account  of  rent  of  house  No.  13  Cheever 
Place." 

In  Brill  v.  Tuttle,  81  N.  Y.  454,  an  order  was  given  reading,  "Pay 
Brill  and  Russell  $300  and  charge  the  same  to  our  account  for  labor 
and  material  performed  and  firmished  in  the  repair  and  alteration  of 
the  house  in  which  you  reside  in  the  village  of  Mohawk." 


FOEM    AND    INTERPRETATION  21 

The  tendency  of  the  courts  is  to  construe  commercial  instruments 
having  on  them  a  memorandum  or  reference  to  dealings  between  the 
parties  as  negotiable,  if  they,  in  other  respects,  have  all  the  characteristics 
of  negotiability. 

Waterbury-Wallace  Co.,  Inc.,  v.  Ivey,  163  N.  Y.  Supp.  7I9. 
In  determining  whether  the  reference  to  the  contract  destroyed  the 
negotiability  of  the  note,  we  are  compelled  to  confine  our  examination 
to  the  note  itself. 

Schmittler  v.  Simon,  101  N.  Y.  554,  559,  5  N.  E.  452,  54  Am.  Rep. 
737;  National  Bank  of  Newbury  v.  Wentworth,  218  Mass.  30,  105  N.  E. 
626.     It  was  said  in  the  Schmittler  Case,  101  N.  Y.  560,  5  N.  E.  455 
54  Am.  Rep.  737,  that:  '  '         ' 

"The  mere  mention  of  a  fund  in  a  draft  does  not  necessarily  deprive 
It  of  the  character  of  commercial  paper;  but  it  must  further  appear,  in 
order  to  have  that  effect,  that  it  contains  either  an  express  or  implied 
direction  to  pay  it  therefiom,  and  not  otherwise.  The  question,  there- 
fore, to  be  determined  her ),  is  whether  the  fund  in  question  is  referred 
to  as  the  measure  of  liability  or  the  means  of  reimbursement." 

The  rule  would  seem,  therefore,  to  go  much  farther  in  supporting 
negotiability  than  it  is  necessary  to  go  in  the  present  case,  as  there  is 
no  reference  to  a  fund  or  other  means  of  pa>Tnent. 

The  tendency  of  the  courts  is  to  construe  comm.ercial  instruments 
havmg  on  them  a  memorandum  or  reference  to  dealings  between  the 
parties  as  negotiable,  if  they  in  other  respects  have  all  the  characteristics 
of  negotiability. 

Schmittler  v.  Simon,  supra,  101  N.  Y.  at  page  561,  5  N.  E.  452,  54 
Am.  Rep.  737;  Hibbs  v.  Brown,  190  N.  Y.  167,  82  N.  E.  1108.  There 
are  many  cases  in  the  books  where  it  has  been  held  that  additional  writings 
upon  a  note  or  bill  have  destroyed  negotiability,  but  it  will  be  found  upon 
examination  that  the  ruling  invariably  rested  upon  a  determination  that 
the  language  there  present  showed  that  the  maker  or  drawer  clearly  in- 
tended to  charge  a  specified  fund,  and  not  to  go  beyond  that.  The  closest 
cases  we  have  found,  are  National  Bank  of  Newbury  v.  Wentworth, 
supra,  and  Taylor  v.  Curry,  109  Mass.  36,  12  Am.  Rep.  661.  In  the 
Bank  Case  the  words  "as  per  terms  of  contract"  followed  the  words  "value 
received"  at  the  end  of  the  note.  In  the  Taylor  Case  the  note  was  given 
by  an  assured  in  payment  of  a  premium,  and  bore  upon  it  the  words  "on 
poHcy  No.  33,386."  In  both  cases  it  was  held  that  the  words  claimed 
to  have  the  effect  of  destroying  negotiability  were  mere  references  to  the 
transactions  out  of  which  the  notes  grew,  and  that  the  instruments  were 
negotiable.  In  the  Taylor  Case  the  court  said  (109  Mass.  at  page  37 
12  Am.  Rep.  661): 


22  NEGOTIABLE    INSTRUMENTS    LAW 

"The  words  quoted  in  these  notes  do  not  express  any  contingency  as 
to  the  payment  of  the  notes,  or  refer  to  any  fund  out  of  which  they  are 
to  be  paid,  but  appear  to  refer  to  the  consideration  for  which  they  were 
given.  Such  a  reference  may  be  for  mere  convenience,  or  for  any  other 
reason;  but  it  cannot  be  interpreted  as  a  modification  of  the  promise. 
Even  if  the  poHcy  contains  a  provision  for  a  set-off  in  case  of  loss,  this 
does  not  make  the  payment  of  the  note  contingent  upon  the  happening 
of  no  loss;  for  the  language  referred  to  does  not  express  any  such  con- 
tingency." 

In  National  Bank  v.  Wentworth,  the  court  said  (218  Mass.  at  page 
32,  105  N.  E.  at  page  627): 

"But,  while  the  defendant  [maker]  doubtless  intended  to  guard 
against  the  payment  of  money  for  which  in  the  future  he  did  not  receive 
an  equivalent,  and  the  payee  has  gone  into  bankruptcy,  the  language 
used  does  not  affect  the  payment  of  the  amounts  shown  by  the  notes." 

In  both  of  these  Massachusetts  cases  the  court  points  out  that  the 
ruling  would  have  been  different,  had  the  questioned  language  been 
such  as  "subject  to"  the  contract,  or  the  policy,  as  the  case  might  be, 
citing  cases  where  reference  in  such  form  was  held  to  create  restriction 
of  payment. 

See  also,  First  National  Bank  v.  Lightner,  74  Kan.  736;  Nichols  v. 
Ruggles,  76  Me.  27;  Whitney  v.  National  Bank,  137  Mass.  351;  Hibbs  v. 
Brown,  112  App.  Div.  (N.  Y.)  219;  Fulton  v.  Varney,  117  App.  Div. 
(N.  Y.)  572;  Bull  v.  Simms,  23  N.  Y.  570;  Oatman  v.  Taylor,  29  N.  Y. 
649;  Schmitter  v.  Simon,  114  N.  Y.  176;  Hibbs  v.  Brown,  190  N.  Y.  167; 
Chicago  R.  R.  Co.  v.  Merchants  Bank,  136  U.  S.  268;  Equitable  Trust 
Co.  v.  Taylor,  146  App.  Div.  (N.  Y.)  424;  Gilbert  v.  Adams,  146  App. 
Div.  (N.  Y.)  864;  Schmitter  v.  Simon,  101  N.  Y.  554;  Brill  v.  Tuttle, 
81  N.  Y.  454;  Parker  v.  City  of  Syracuse,  31  N.  Y.  376. 

Payment  out  of  a  particular  fund. — This  expression  is  the  same  as 
found  in  many  of  the  cases  "drawn  on  the  general  credit  of  the  drawer." 

Waddell  v.  Hanover  Bank,  48  Misc.  578;  Fulton  v.  Varney,  117  App. 
Div.  (N.  Y.)  572;  Hibbs  v.  Brown,  190  N.  Y.  167. 

The  mere  mention  of  a  fund  in  a  draft  does  not  necessarily  deprive 
it  of  the  character  of  negotiable  paper;  it  is  only  where  there  is  a  direction 
expressed  or  implied,  to  pay  it  from  the  fund,  and  not  otherwise,  that  it 
will  have  that  effect. 

Schmitter  v.  Simon,  101  N.  Y.  554;  Munger  v.  Shannon,  61  N.  Y.  255; 
Redmond  v.  Adams,  51  Me.  429;  Coursen  v.  Ledder,  31  Pa.  St.  506. 

An  order  upon  a  savings  bank  for  a  certain  sum  of  money,  made 
chargeable  to  the  drawer's  account,  but  with  the  printed  words  "the 


FORM    AND   INTERPRETATION  23 

bank  book  of  the  depositor  must  accompany  this  order"  upon  the  face 
of  the  order,  below  the  signature  of  the  drawer  is  not  a  negotiable  instru- 
ment. 

White  V.  Gushing,  51  Am.  St.  Rep.  402,  88  Me.  339. 

Where  reference  is  made  to  a  special  fund  merely  as  a  direction  to 
the  drawee  how  to  reimburse  himself,  and  the  payment  is  not  made  to 
depend  upon  the  adequacy  of  the  fund  it  will  not  vitiate  the  bill. 

Edward  on  Bills  and  Notes,  158;  Munger  v.  Shannon,  61  N.  Y.  255; 
Brill  V.  Tuttle,  81  N.  Y.  457. 

Subd.  2. — The  insertion  of  a  memorandum  explaining  the  nature 
of  the  business  for  which  the  bill  or  note  was  given  will  not  make  it  non- 
negotiable,  as  such  memorandiim  does  not  make  the  payment  conditional. 

Tiedman  Commercial  Paper,  26;  4  Am.  &  Eng.  Ency.  of  Law  89; 
Rigely  v.  Bank,  109  111.  479,  54  L.  R.  A.  827. 

The  following  instruments  have  been  passed  upon  by  the  Courts 
and  held  to  be  negotiable : 

"On  account  of  contract." 

First  National  Bank  v.   Lightner,  74  Kans.  736,  88  Pac.  Rep.  59. 

"Value  received  as  per  contract." 

National  Bank  of  Newberry  v.  Wentworth,  Mass.,  105  N.  E.  Rep. 
626. 

"For  payment  under  contract  of  even  date." 

Slaughter  v.  Bank  of  Bisbee,  Ariz.,  154  Pac.  Rep.  1040. 

"Pay  to  the  order  of  Wm.  H.  Deweese,  atty.,  $1,150.76  (eleven 
hundred  and  fifty  and  76-100)  in  full  for  A.  J.  Kenney  mortgage.  To 
Denton  National  Bank,  Denton,  Maryland.     Oscar  Clark." 

Denton  National  Bank  v.  Kenney,  Md.  81  Atl.  Rep.  227. 

"Having  been  cause  of  a  money  loss  to  my  friend,  I  have  given  her 
three  thousand  dollars.  I  hold  this  amount  in  trust  for  her  and  one  year 
after  date  or  thereafter  on  demand,  I  promise  to  pay  to  the  order  of  Jane 
Doe,  her  heirs  or  assigns,  three  thousand  dollars  with  interest." 

Hickok  V.  Bunting,  86  Supp.  1059,  92  App.  Div.  167. 

"Two  years  after  date  we  promise  to  pay  to  the  order  of  Howard 
Hazlett,  trustee,  thirty-five  thousand  and  twenty-one  dollars  with  interest 
from  date  until  paid,  at  the  rate  of  6  per  cent,  per  annum,  in  part  payment 
for  land  in  Logan  and  Boone  Counties,  and  upon  which  a  lien  has  been 
reserved  to  secure  this  note,  payable  at  the  National  Exchange  Bank, 
Wheeling,  W.  Va." 

Dollar  Savings  &  Trust  Co.  v.  Crawford,  W.  Va.,  70  S.  E.  Rep.  1089. 

See  also,  Nichols  v.  Ruggles,  76  Me.  25;  Bank  v.  Mitchell,  96  N.  C. 
53;  Shepard  v.  Abbott,  137  Mass.  224;  Bank  v.  Lightner,  88  Pac.  (Kan.)  59. 


24 


NEGOTIABLE   INSTRUMENTS   LAW 


An  order  drawn  by  the  president  of  a  railroad  company  upon  its 
treasurer,  directing  the  latter  to  pay  A  or  order,  a  specified  sum,  stated 
as  being  the  amount  due  A  for  work  done  by  him  as  a  contractor  in  building 
a  section  of  the  corporation's  line,  is  in  effect  a  promissory  note. 
Fairchild  v.  Ogdensburg  C.  &  R.  R.  R.,  15  N.  Y.  337. 
In  Mott  V.  Havanna  National  Bank,  22  Hun.  354,  the  court  held, 
"The  addition  of  the  statement  of  the  consideration,  to  wit:  the  engine, 
with  the  statement  that  it  was  to  remain  the  property  of  the  owner  until 
the  note  was  paid,  did  not  render  it  non-negotiable. 

See  also,  Hereth  v.  Meyer,  33  Ind.  511;  National  Bank  v.  Wentworth, 
218  Mass.  30;  Equitable  Trust  Co.  v.  Taylor,  146  App.  Div.  (N.  Y.)  424; 
Merchants  Bank  v.  Santa  Co.,  162  App.  Div.  (N.  Y.)  248;  Pope  v.  Lumber 
Co.,  162  N.  C.  206;  Chicago  R.  R.  Equipment  Co.  v.  Merchants  National 
Bank,  136  U.  S.  268;  Third  National  Bank  v.  Bowman,  50  App.  Div. 
(N.  Y.)  66;  Hedges  v.  Shuler,  22  N.  Y.  114. 

The  presence  of  the  words  "as  per  contract"  on  the  back  of  the  note 
did  not  affect  its  negotiabiHty,  using  the  word  "negotiability"  in  its  large 
sense  as  including  the  passing  of  title  free  of  equities  in  favor  of  the  maker 
and  against  the  payee,  as  well  as  the  transfer  of  title  by  indorsement;  that 
is,  the  right  of  a  bona  fide  purchaser  for  value  before  maturity  and  in 
due  course  of  business  was  not  affected.  It  is  essential  to  the  negotiability 
of  an  instrument  that  the  promise  be  to  pay  a  definite  simi  in  money, 
absolutely  and  not  contingently,  and  generally  and  not  out  of  a  particular 
fund.  In  First  National  Bank  v.  Lightner,  74  Kan.  736,  88  Pac.  59,  8 
L.  R.  A.  (N.  S.)  231,  118  Amer.  St.  Rep.  353,  11  Ann.  Cas.  596,  the  words 
"on  account  of  contract,"  written  on  the  face  of  the  note,  were  held  not  to 
affect  negotiability.     Snelling  Bank  v.  Clasen,  157  N.  W.  643. 

§  23.  Determinable  future  time;  what  constitutes.     An 

instrument  is  payable  at  a  determinable  future  time,  within 
the  meaning  of  this  chapter,  which  is  expressed  to  be  payable: 

1 .  At  a  fixed  period  after  date  or  sight ;  or 

2.  On  or  before  a  tixed  or  determinable  future  time 
specified  therein;  or 

3.  On  or  at  a  fixed  period  after  the  occurrence  of  a 
specified  event,  which  is  certain  to  happen,  though  the  time 
of  happening  be  uncertain. 

An  instnmient  payable  upon  a  contingency  is  not  negoti- 
able, and  the  happening  of  the  event  does  not  cure  the  defect. 


FORM   AND   INTERPRETATION  25 

Variant. — After  Subdivision  3  and  before  the  last  sentence  the  Wis- 
consin statute  has  inserted  "4  at  a  fixed  period  after  date  or  sight,  though 
payable  before  then  on  a  contingency." 


Subd.  I. — An  action  on  promissory  notes  which  are  due  according 
to  their  terms,  and  which  were  given  as  the  consideration  for  advertising 
to  be  performed  under  a  contract,  will  not  be  postponed  until  its  com- 
pletion, where  there  is  no  such  provision  in  the  contract. 

Dismond  v.  Friedman,  162  N.  Y.  487. 

The  time  of  maturity  is  determined  by  the  intent  of  the  parties. 
Torpey  v.  Tebe,  184  Mass.  307. 

A  note  stating  no  time  of  payment  but  written  on  its  face  "due  Jan.  1," 
was  construed  as  payable  January  1 . 

Torpey  v.  Tebo,  184  Mass.  307. 

The  following  notes  have  been  held  to  be  valid  and  negotiable. 

"The  makers  and  indorsers  of  this  note  *  *  *  authorize  said 
bank  (payee)  to  appropriate  on  this  note,  whether  due  or  not,  at  any 
time  at  its  option,  without  notice,  or  legal  proceedings,  any  money  which 
they  or  any  one  or  more  of  them  may  have  jointly  or  severally  in  said 
bank  on  deposit  or  otherwise." 

Louisville  Banking  Co.  v.  Gray,  123  Ala.  251,  26  So.  205. 

"The  said  Henry  Hem  and  Maria  Hern  (makers)  to  have  the  privilege 
of  paying  the  sum  of  $25.00  or  $50.00  at  any  time  during  the  5  years  on 
accoimt  of  said  principal  sum." 

Fisher  v.  O'Hanlon,  Neb.,  141  N.  W.  157. 

"Two  years  after  date  we  promise  to  pay  to  the  order  of  A.  H.  Pickerall 
and  Frank  Hume  twenty-four  thousand,  seven  hundred  and  fifty  80-100 
dollars  for  value  received  with  interest  and  eight  per  cent,  per  annum 
interest  payable  semi-annually,  *  *  *  ^jth  privilege  of  paying  all  or 
any  portion  before  maturity." 

Bowie  V.  Hume,  13  App.  D.  C.  286. 

"If,  in  the  judgment  of  the  holder  of  this  note,  said  collateral  depre- 
ciates in  value,  the  undersigned  agrees  to  deliver  when  demanded  additional 
security  to  the  satisfaction  of  said  holder ;  otherwise  this  note  shall  matiire 
at  once." 

Kennedy  v.  Broderick,  216  Fed.  Rep.  137. 

"The  undersigned  having  deposited  with  the  said  bank  as  collateral 
security  for  the  payment  hereof  and  of  any  and  all  claims  and  demands 
of  indebtedness  of  which  the  undersigned  may  now  or  hereafter  be  liable, 
to  said  bank,  whether  directly  or  contingently  and  whether  as  principal, 
surety,  guarantor  or  indorser,  the  securities  named  at  the  foot  of  this 


26  NEGOTIABLE    INSTRUMENTS    LAW 

note,  it  is  further  agreed  by  the  undersigned  that,  in  case  of  depreciation 
in  the  market  value  of  the  securities  herewith  or  hereafter  pledged  to 
secure  this  note,  the  undersigned  will  deposit  and  pledge  with  said  bank 
such  additional  security  as  it  may  from  time  to  time  require  and  in  default 
of  such  deposit  and  pledge  for  three  days  after  notice  to  make  the  same 
shall  be  given  to  or  left  at  the  place  of  business  of  the  undersigned,  this 
note,  at  the  option  of  the  bank,  shall  become  due  and  payable." 

Finley  v.  Smith,  165  Ky.  445,  177  S.  W.  Rep.  262. 

"Six  months  after  death  I  promise  to  pay  Clyde  D.  Burke  from  my 
estate  and  through  my  administrator  one  thousand  dollars,  6  per  cent, 
interest  from  maturity." 

Deeter  v.  Burk,  Ind.,  107  N.  E.  Rep.  304.     (1914) 

The  three  following  notes  were  held  to  be  non-negotiable  on  the 
grotmd  that  they  were  not  payable  at  a  fixed  or  determinable  future  time. 

"Said  C.  E.  Reynolds  (payee)  or  his  agents  have  full  power  to  declare 
this  note  due  and  take  possession  of  the  said  automobile  for  which  it  is 
given  when  they  deem  themselves  insecure  even  before  the  maturity  of 
the  note." 

Reynolds  v.  Vint,  Oregon,  144  Pac.  Rep.  526. 

"The  makers  and  indorsers  of  this  note  hereby  severally  waive  pre- 
sentment for  payment,  notice  of  payment,  protest  and  notice  of  protest 
and  all  exemption  that  may  be  allowed  by  law,  and  valuation  and  ap- 
praisement laws  waived,  and  each  signer  and  indorser  makes  the  other 
an  agent  to  extend  the  time  of  this  note." 

Rossville  State  Bank  v.  Heslet,  Kans.,  113  Pac.  Rep.  1052. 

A  promissory  note  which  provided  that  the  payees  "are  hereby  fully 
authorized  and  empowered  to  declare  this  note  due  any  time  they  may 
feel  insecure  even  before  the  maturity  of  the  note,"  is  non-negotiable 
because  of  uncertainty  as  to  time  of  payment. 

Western  Machine  Co.  v.  Burnett,  161  Pac.  184;  Reynolds  v.  Vint, 
144  Pac.  (Or.)  526. 

A  note  containing  a  provision  that  the  title  of  the  property  for  which 
it  was  given  should  remain  in  the  payee,  and  that  he  should  have  the 
right  to  declare  the  amount  due  and  take  possession  of  the  property 
whenever  he  may  deem  himself  insecure  "even  before  maturity  of  the 
note"  is  not  negotiable. 

Kimball  v.  Studebaker,  94  Pac.  (Id.)  1039. 

Subd.  2. — A  note  payable  at  a  fixed  date  with  the  proviso  "When 
contract  is  completed  and  satisfactory"  is  not  payable  on  the  date  men- 
tioned imless  all  the  other  conditions  have  been  fulfilled. 


FORM    AND    INTERPRETATION  27 

11  L.  R.  A.  748  with  notes;  Stultz  v.  Silva,  119  Mass.  139;  First 
National  Bank  v.  Skeen,  101  Mo.  683;  Home  Bank  v.  Dmmgoole,  109 
N.  Y.  67. 

Municipal  bonds  issued  under  a  statute  providing  they  should  be 
payable  any  time  before  due,  are  negotiable.  While  the  holder  could  not 
exact  payment  before  the  day  fixed  in  the  bonds:  yet  by  their  terms, 
they  were  payable  at  a  time  which  must  certainly  arrive. 

Fisher  v.  O'Hanlon,  93  Neb.  529;  See  also,  HoUiday  State  Bank  v. 
Hoffman,  85  Kan.  71;  Hibernia  Bank  v.  Dresser,  132  La.  532;  Bright  v. 
Oldfield,  81  Wash.  442;  Thorpe  v.  Mindeman,  123  Wis.  149. 

Where  one,  whose  notes  were  discounted  by  a  bank,  signed  an  agree- 
ment containing  a  list  of  his  assets  and  liabilities  and  providing  that,  if 
such  statement  proved  false  in  any  respect  or  in  case  of  his  insolvency 
the  notes  should  immediately  become  due,  the  bank  might  declare  the  notes 
due,  and  set  off  the  maker's  deposit  against  them,  even  though  it  did  not 
discover  the  maker's  insolvency  until  after  his  death. 

Paoli  V.  East  River  National  Bank,  155  N.  Y.  Supp.  245. 

To  constitute  a  valid  promissory  note,  it  must  be  for  the  payment 
of  money  at  some  fixed  time,  or  upon  some  event  which  must  inevitably 
happen,  and  that  its  character  as  a  promissory  note  cannot  depend  upon 
future  events,  but  solely  upon  its  character  when  created. 

Chicago  Ry.  Equipment  Co.  v.  Merchants  Bank,  136  U.  S.  268; 
See  Sec.  320. 

The  negotiable  quality  of  a  promissory  note,  on  or  before  a  fixed  day, 
is  not  destroyed  by  a  provision  that  the  maker  and  indorsers  severally 
waive  presentment  and  notice  of  protest,  and  consent  that  the  time  of 
payment  may  be  extended  without  notice. 

Pomeroy  v.  Buttery,  116  N.  W.  341;  16  L.  R.  A.  (N.  S.)  878. 

The  reservation  in  a  note  of  the  right  to  pay  it  before  maturity  in 
certain  specified  installments  does  not  render  it  non-negotiable.  The 
object  of  the  law  in  requiring  certainty  as  to  the  time  of  payment  is  to 
give  to  negotiable  paper  as  far  as  possible  the  quality  of  a  circulating 
medium  like  money,  and  practically  to  make  it  represent  money,  is  fully 
met  in  a  note  in  such  form. 

Riker  v.  Sprague,  14  R.  I.  402,  51  Am.  Rep.  413. 

A  note  containing  the  provision  that  it  may  be  renewed  at  maturity 
is  not  negotiable  for  the  reason  that  it  is  not  an  absolute  unconditional 
contract  to  pa.y  the  amount  at  maturity. 

Citizens  Bank  v.  Piolett,  126  Pa.  St.  194. 

Subd.  3. — An  instnmient  by  which  the  signer  agrees  to  pay  a  sum 
certain  at  a  specified  time  after  his  death  is  a  valid  promissory  note ;  death 
being  a  contingency  which  is  sure  to  happen. 


28  NEGOTIABLE   INSTRUMENTS    LAW 

Cartwright  v.  Gray,  127  N.  Y.  92;  See  also,  Bristol  v.  Warner,  19 
Conn.  7;  Shaw  v.  Camp,  160  111.  425;  Hegeman  v.  Moon,  131  N.  Y.  462; 
Root  V.  Strang,  77  Hun.  14;  Gilbert  v.  Adams,  146  App.  Div.  (N.  Y.) 
864;  Beatty  v.  Western  College,  117  111.  280. 

The  words  "upon  the  return  of  this  receipt,"  do  not  make  it  payable 
upon  a  contingency,  or  constitute  a  condition  precedent  to  any  payment. 

Frank  v.  Wessels,  64  N.  Y.  158. 

Where  certain  coupons  cut  from  railroad  bonds  were  subject  to  the 
condition  that  the  time  of  pa>TTient  could  be  changed  from  time  to  time 
at  the  option  of  a  majority  of  holders  of  the  series  of  bonds  simultaneously 
issued  therewith,  it  would  deprive  them  of  one  of  the  essential  characteris- 
tics of  negotiable  paper. 

McClellan  v.  Norfork  R.  R.,  110  N.  Y.  476. 

A  note  payable  to  A  "when  he  is  twenty-one  years  of  age"  is  not  a 
negotiable  promissory  note,  it  not  being  certain  that  he  will  ever  reach 
that  age. 

Rice  V.  Rice,  43  App.  Div.  (N.  Y.)  458;  Kelly  v.  Hemmingway, 
13  111.  604. 

A  note  which  states  that  it  is  payable  to  the  order  of  the  payee,  at  a 
certain  fixed  time,  and  states  that  it  is  one  of  a  series  of  notes  given  for 
cars  sold  by  the  payee  to  the  maker,  and  is  to  become  due  upon  the  failure 
to  pa}^  any  one  of  the  series,  and  that  it  is  agreed  that  the  title  of  the 
cars  shall  remain  in  the  payee  until  all  the  notes  are  paid,  is  a  valid  nego- 
tiable promissory  note. 

Chicago  Ry.  Equipment  Co.  v.  Merchants'  National  Bank  of  Chicago, 
130  U.  S.  268;  See  also,  Bemeson  v.  London  Insurance  Co.,  201  Mass.  172. 

An  order,  "Forty  days  after  date  pay  to  the  order  of  A  $1,500,  and 
charge  same  to  accoimt  of  contract.  On  account  of  contract  when  com- 
pleted and  satisfactory"  is  not  a  bill  of  exchange  absolutely  payable  at 
the  end  of  forty  days,  whether  the  contract  was  completed  or  not. 

Home  Bank  v.  Drumgoole,  109  N.  Y.  63. 

Subd.  4. — A  series  of  notes  payable  at  different  times,  but  all  to 
become  payable  on  the  default  in  the  payment  of  one,  are  negotiable. 

White  V.  Thatcher,  188  S.  W.  Rep.  61. 

§  24.  Additional  provisions  not  afifecting  negotiability. 

An  instrument  which  contains  an  order  or  promise  to  do  any 
act  in  addition  to  the  payment  of  money  is  not  negotiable. 
But  the  negotiable  character  of  an  instrument  otherwise 
negotiable  is  not  affected  by  a  provision  which : 


FOEM    AXD    INTERPRETATION"  29 

1.  Authorizes  the  sale  of  collateral  securities  in  case  the 
instrument  be  not  paid  at  maturity ;  or 

2.  Authorizes  a  confession  of  judgment  if  the  instriunent 
be  not  paid  at  maturity;  or 

3.  Waives  the  benefit  of  any  law  intended  for  the  advan- 
tage or  protection  of  the  obligor;  or 

4.  Gives  the  holder  an  election  to  require  something  to 
be  done  in  lieu  of  payment  of  money. 

But  nothing  in  this  section  shall  validate  any  provision  or 
stipulation  otherwise  illegal. 

Variant. — The  Illinois  and  Wisconsin  statute  add  to  end  of  the  saving 
clause  the  words:  "or  authorize  the  waiver  of  exemptions  from  the  execu- 
tion." 

The  Illinois  statute  also  omits  the  words:  "if  the  instrument  be  not 
paid  at  maturity"  in  Subdivision  2.  The  Kentucky  statute  omits  Sub- 
division 3. 


An  instrument  providing  for  the  payment  of  a  certain  sum  of  money 
and  the  payment  of  something  else,  the  value  of  which  is  not  ascertained, 
but  depends  upon  extrinsic  evidence,  is  not  a  bill  or  note. 

Dorsey  v.  Wolff,  142  111.  589;  Hohday  v.  State  Bank,  116  Pac.  (Kan.) 
239. 

Subd.  I. — Where  the  maker  of  an  instrument  in  the  form  of  a  promis- 
sory note,  states  therein  that  bonds  have  been  deposited  as  collateral 
security  with  a  certain  person,  and  gives  authority  to  sell  the  same  upon 
non-payment  of  the  note  at  maturity,  and  apply  the  proceeds  to  the 
payment  of  the  note;  held  to  be  negotiable. 

Arnold  v.  Rock  River  R.  R.,  5  Duer  207;  Collins  v.  Bradbury,  64 
Me.  37. 

The  law  seems  to  be  settled  that  although  it  may  appear  on  the  face 
of  the  note  that  its  payment  is  secured  by  collateral  in  personal  property, 
yet  if  otherwise  in  proper  form,  it  is  negotiable. 

Heard  v.  Dubque  Co.  Bank,  8  Neb.  10;  See  also,  Kennedy  v.  Bro- 
derick,  216  Fed.  Rep.  137;  Biegler  v.  Merchants'  Trust  Co.,  62  111.  App. 
560;  HolHday  State  Bank  v.  Hoffman,  85  Kan.  71;  Towe  v.  Rice,  122 
Mass.  67;  Costello  v.  Crowell,  127  Mass.  293;  ColHns  v.  Bradbury,  64 
Me.  37;  Perry  v.  Biglow,  128  Mass.  129. 

Subd.  2. — A  note  authorizing  a  confession  of  judgment  whether 
due  or  not  is  not  negotiable,  for  the  reason  that  the  time  of  payment  is 
uncertain,  depending  upon  the  whim  of  the  holder. 


30  NEGOTIABLE   INSTRUMENTS   LAW 

Wisconsin  Baptists,  etc.  v.  Bobler,  115  Wis.  289;  First  National 
Bank  v.  Russell,  124  Tenn.  618;  Dan.  Neg.  Inst.  Sec.  61  and  cases  collected. 

Statutory  construction  of  this  Subdivision  renders  an  instrument 
authorizing  judgment  before  maturity  non-negotiable. 

Bank  of  Elgin  v.  Russell,  139  S.  W.  (Tenn.)  618. 

Subd.  3. — See  Zimmerman  v.  Anderson,  67  Pa.  St.  421;  Zimmerman 
V.  Rote,  75  Pa.  St.  188;  HolHday  State  Bank  v.  Hoffman,  85  Kan.  71. 

The  clause  waiving  all  defenses  on  the  ground  of  extension  of  time  has 
been  held  not  to  destroy  the  negotiability  of  the  note.  First  National 
Bank  v.  Buttery,  17  N.  D.  326,  116  N.  W.  341,  16  L.  R.  A.  (N.  S.)  878, 
17  Ann.  Cas.  52;  National  Bank  of  Commerce  v.  Kenney,  98  Tex.  293,  83 
S.  W.  368;  Jacobs  v.  Gibson,  77  Mo.  App.  244;  City  National  Bank  v. 
Goodloe-McClelland  Com.mission  Co.,  93  Mo.  App.  123;  Farmer, 
Thompson  &  Helsell  v.  Bank  of  Graettinger,  130  Iowa  469,  107  N.  W. 
170;  Stitzel  v.  Miller,  250  111.  72,  95  N.  E.  53,  34  L.  R.  A.  (N.  S.)  1004, 
Ann.  Cas.  191 2B,  412;  Navajo  County  Bank  v.  Dolson,  163  Cal.  485,  126 
Pac.  153,  41  L.  R.  A.  (N.  S.)  787;  Missouri-Lincoln  Trust  Co.  v.  Long, 

31  Okl.  1,  120  Pac.  291;  De  Grot  v.  Focht,  37  Okl.  267,  131  Pac.  172; 
Longmont  National  Bank  v.  Loukonen,  53  Colo.  489,  127  Pac.  947,  Ann. 
Cas.  1914B,  208. 

Subd.  4. — Provision  for  the  payment  in  "cash  or  goods  on  demand" 
being  optional  with  the  holder  to  accept  cash  or  goods  is  negotiable. 

Hostatter  v.  Wilson,  36  Barb.  307. 

An  instrument  providing  for  payment  of  money  or  stock  negotiable 
for  the  same  reason. 

Hodges  v.  Shuler,  22  N.  Y.  116. 

§  25.  Omissions;  seal;  particular  money.  The  validity 
and  negotiable  character  of  an  instrument  are  not  affected 
by  the  fact  that: 

1 .  It  is  not  dated ;  or 

2.  Does  not  specify  the  value  given,  or  that  any  value 
has  been  given  therefor;  or 

3.  Does  not  specify  the  place  where  it  is  drawn  or  the 
place  where  it  is  payable ;  or 

4.  Bears  a  seal;  or 

5.  Designates  a  particular  kind  of  current  money  in  which 
payment  is  to  be  made. 

But  nothing  in  this  section  shall  alter  or  repeal  any 
statute  requiring  in  certain  cases  the  nature  of  the  considera- 
tion to  be  stated  in  the  instrument. 


FORM   AND   INTERPRETATION  31 

Variant. — The  Illinois  statute,  Subdivision  5,  reads  as  follows:  "Is 
payable  in  currency  or  current  funds,  or  funds,  or  designates  a  particular 
kind  of  current  money  in  which  payment  is  to  be  made."  The  Illinois 
statute  also  omits  the  saving  clause. 


Subd.  I. — The  date  of  a  check  or  note  is  only  presumptive  of  the 
time  it  was  issued.  A  check  or  note  has  no  inception  until  delivery,  and 
for  all  legal  purposes  it  is  to  be  considered  as  made  on  the  date  it  is  de- 
livered. 

Cowing  V.  Altman,  71  N.  Y.  411;  Church  v.  Stevens,  56  Misc.  572; 
Bigge  V.  Piper,  86  Tenn.  589;  See  Section  35. 

It  is  the  general  rule  that  where  the  words  indicative  of  the  time  of 
payment  are  omitted  as  "one  after  date"  so  that  on  the  face  of  the  instru- 
ment no  time  of  payment  is  specified,  the  omission  may  be  supplied  by 
the  holder  and  such  alteration  will  not  vitiate  the  paper.     See  notes  Sec.  33. 

Nichols  V.  Frothingham,  45  Me.  220. 

Subd.  2. — The  omission  of  the  words  "for  value  received"  in  a  note 
is  not  material. 

Underbill  v.  Phillips,  10  Hun.  591;  Dan.  Neg.  Int.  Sec.  108. 

The  production  of  a  note  and  proof  of  defendant's  signature  make  a 
prima  facie  case  for  plaintiff,  but  the  burden  of  proof  still  remains  upon 
the  plaintiff  to  prove  consideration,  and  if  there  is  any  evidence  upon 
this  on  behalf  of  the  defendant,  plaintiff  must  show,  upon  a  preponderance 
of  the  whole  evidence  that  there  was  a  valuable  consideration. 

Durland  v.  Durland,  153  N.  Y.  67;  See  also,  Dan.  Neg.  Inst.  Sec.  164; 
Bruyn  v.  Russell,  52  Hun.  17;  Brown  v.  Russell,  60  Hun.  280;  Simpson  v. 
Davis,  119  Mass.  269;  Periy  v.  Periy,  144  Mass.  104;  See  Consideration 
Art.  3. 

"Due  Kimball  &  Kenston  $325,  payable  on  demand,  is  a  promissory 
note  within  the  statute.  Neither  the  acknowledgement  of  value  received 
or  negotiable  words  are  essential. 

Carnwright  v.  Gray,  127  N.  Y.  97;  Carver  v.  Hayes,  47  Me.  257. 

Subd.  3. — Where  the  maker  of  a  promissory  note  removes  from 
the  state  and  continues  to  reside  abroad  imtil  its  maturity,  the  indorser 
may  be  charged  without  a  demand  of  such  maker  or  presentment  at  his 
last  place  of  residence  in  the  state. 

Foster  v.  Julian,  24  N.  Y.  28 ;  Adams  v.  Leland,  30  N.  Y.  309 ;  Anderson 
v.  Drake,  14  Johns  114. 


32  NEGOTIABLE   INSTRUMENTS    LAW 

On  the  principle  that  neither  the  date  nor  place  is  essential,  see 
Dan.  Neg.  Inst.  Chapter  3,  Sec.  11. 

A  negotiable  instrument  is  presumed  to  be  made  where  it  is  dated. 

N.  Y.  Manufacturers,  etc.  Co.  v.  BHtz,  131  App.  Div.  (N.  Y.)  17. 

If  no  place  of  payment  is  named  in  a  note,  it  is  presumed  to  be  payable 
at  the  place  of  residence  of  the  maker. 

Cox  V.  Bank,  100  U.  S.  704;  Bank  v.  Lee,  117  Mich.  122;  75  N.  W. 
444;  McCruden  v.  Jones,  173  Pa.  507;  Brown  v.  Jones,  113  Ind.  46. 

See  notes  on  Acceptance  and  Notice  of  Dishonor,  post. 

Subd.  4. — This  changes  the  law  as  laid  down  in  some  of  the  states. 
Instruments  under  seal  imposing  obligations  upon  private  individuals 
had  been  held  to  be  non-negotiable. 

Merritt  v.  Cole,  9  Him.  98. 

But  it  makes  no  change  in  the  law  existing  before  its  adoption  in  the 
states  of  Colorado,  Florida,  Georgia,  Illinois,  Kansas,  Massachusetts, 
Nebraska,  North  Carolina,  Ohio  and  Tennessee. 

Prior  to  the  adoption  of  the  statute  the  courts  have  been  practically 
imanimous  in  declaring  obligations  of  corporations  having  attached 
thereto  a  seal,  negotiable,  on  the  theory  that  the  seal  was  not  placed  there 
to  restrain  their  negotiability,  but  rather  to  stamp  them  as  genuine. 

Dinsmore  v.  Duncan,  57  N.  Y.  577;  See  also,  St.  Paul's  Church  v. 
Fields,  81  Conn.  670;  Jackson  v.  Myers,  43  Md.  452;  Bank  of  Houston  v. 
Day,  145  Mo.  App.  410;  Weeks  v.  Esler,  143  N.  Y.  374;  Chase  National 
Bank  v.  Faurot,  149  N.  Y.  532;  Osborne  v.  Hubbard,  20  Oregon,  318; 
Mason  v.  Frick,  105  Pa.  St.  162. 

The  mere  attaching  of  a  seal  after  the  signature  upon  a  promissory 
note  does  not  raise  the  presumption  that  the  note  is  a  sealed  instnmient 
iinless  there  be  a  recognition  of  the  seal  in  the  body  of  the  instrument  by 
some  such  phrase  as  "witness  my  hand  and  seal"  or  "signed  and  sealed." 

Matter  of  Pirie,  198  N.  Y.  209. 

Subd.  5.— See  notes  to  Sec.  20,  Subd.  2;  Dille  v.  White,  132  Iowa 
327,  10  L.  R.  A.  510;  Chrysler  v.  Griswold,  43  N.  Y.  209. 

Saving  Clause. — Undoubtedly  refers  to  notes  given  for  patent  rights 
or  for  speculative  consideration  incorporated  in  this  act.  See  Sections 
330,  331. 

§  26.  When    payable    on    demand.     An    instrument    is 
payable  on  demand: 

1.  Where  it  is  expressed  to  be  payable  on  demand,  or  at 
sight,  or  on  presentation;  or 

2.  In  which  no  time  for  payment  is  expressed. 


FORM    AND    INTERPRETATION  33 

Where  an  instrument  is  issued,  accepted  or  indorsed 
when  overdue,  it  is,  as  regards  the  person  so  issuing,  accepting 
or  indorsing  it,  payable  on  demand. 

Subd.  I. — A  note  payable  on  demand  not  affected  by  conditions 
contained  in  a  letter. 

Beaudrias  v.  Curtiss,  44  N.  Y.  St.  Rep.  478,  63  Hun.  628. 

When  a  specific  sum  of  money  is  made  payable  upon  demand,  or  at 
a  specified  time,  at  a  particular  place,  as  against  the  original  debtor, 
no  demand  at  the  time  or  place,  prior  to  the  commencement  of  the  smt 
is  necessary.  The  commencement  of  the  suit  itself  is  a  sufficient  demand. 
The  only  benefit  the  defendant  could  get  from  the  specification  of  payment 
at  a  particular  place  is  that  if  he  was  ready  there  to  pay,  and  kept  ready, 
he  could  set  up  that  fact  in  his  answer  and  then  pay  the  money  into  court 
and  allege  such  payment  in  his  answer,  and  thus  shield  himself  from 
liability  for  interest  and  costs. 

Rowland  v.  Edmunds,  24  N.  Y.  308;  Locklin  v.  Moore,  57  N.  Y. 
360-362;  First  National  Bank  v.  Story,  200  N.  Y.  349;  Dominion  Trust 
Co.  V.  Hildner,  243  Pa.  253,  90  Atl.  69;  Farmers'  National  Bank  v.  Venner, 
192  Mass.  531,  78  N.  E.  540,  7  Ann.  Cas.  690;  Florence  Oil,  etc.,  Co.  v. 
First  National  Bank,  38  Colo.  119,  88  Pac.  182;  Citizens'  Savings  Bank  v. 
Vaughan,  115  Mich.  156,  73  N.  W.  143;  Dominion  Trust  Co.  v.  Hildner, 
243  Pa.  253,  90  Atl.  69;  Dewees  v.  Middle  States,  etc.,  Co.,  248  Pa.  202, 
93  Atl.  958;  1  Daniel,  Neg.  Inst.  Sec.  643;  3  R.  C.  L.  1174-1175;  7  Cyc.  965. 


r&^o<>^7>-  -2:^.^^^^^y7^y -^^^/aa 


y?/^     ,^^<V^^^:-^^>^^vt>^^i;^^;?^-<^i^^ 


%K B^ <^  >^q^Vv^,g/t^ 


The  words  "on  demand"  in  a  note  do  not  make  a  demand  a  condition 
precedent  to  a  right  of  action,  but  import  that  the  debt  is  due  and  demand- 
able,  or  at  least  that  the  commencement  of  a  suit  therefor  is  a  sufficient 
demand. 

Dominion  Trust  Co.  v.  Hilder,  243  Pa.  St.  235;  Merchants'  National 
Bank  v.  Lovitt,  114  Mo.  519. 


34  NEGOTIABLE   INSTRUMENTS   LAW 

As  between  the  maker  and  the  payee,  a  note  payable  on  demand 
is  due  as  soon  as  it  is  executed. 

Brophy  v.  Wilson,  124  Pac.  510. 

A  promissory  note  dated  July  21,  1874,  was  by  its  terms  "payable 
on  demand  after  date  with  interest  after  maturity."  The  note  was  in- 
dorsed and  transferred  by  the  payee  on  the  day  of  its  date.  It  was  pre- 
sented to  the  bank  for  payment  on  the  February  4,  1878,  which  was 
refused  and  thereupon  protested  and  the  indorser  notified.  In  an  action 
upon  the  note  held,  that  it  was  the  interest  of  the  parties  that  the  note 
should  be  presented  for  payment,  if  not  immediately,  at  least  within  a 
very  short  time,  and  that  the  delay  was  such  as  to  dishonor  the  note, 
and  the  indorser  was  discharged. 

Crim  V.  Starkweather,  88  N.  Y.  339. 

A  note  payable  on  demand  and  a  note  payable  on  demand  after  date, 
are  for  the  purpose  of  the  running  of  the  Statute  of  Limitations  deemed 
due  and  payable  respectively  on  the  day  of  the  date  of  the  note  and  the 
day  followang  -without  demand. 

Harden  v.  Dixon,  77  App.  Div.  (N.  Y.)  241;  McMullen  v.  Rafferty, 
89  N.  Y.  456;  Neg.  Int.  Law,  Sec.  146. 

Such  note  providing  for  no  payment  of  interest  draws  no  interest 
tmtil  a  demand  is  duly  miade. 

Ledyard  v.  Brill,  199  N.  Y.  62;  Lawrence  v.  Church,  128  N.  Y.  324, 
332;  Am.  &  Eng.  Ency.  of  Law  (2nd  ed.)  1020;  Adams  v.  Adams,  55  N.  J. 
Eq.  42;  Van  Vliet  v.  Kanter,  139  App.  Div.  (N.  Y.)  605;  See  Sec.  131. 

A  negotiable  instrument  expressed  to  be  payable  "on  demand  after 
date"  is  payable  on  demand,  and  it  is  so  payable  although  it  is  made  to 
bear  interest  from  date. 

Fenn.  v.  Gay,  146  Mass.  118;  O'Neil  v.  Wagner,  81  Cal.  631;  Turner 
V.  Iron  Mining  Co.,  74  Wis.  355,  43  N.  W.  149;  Peninsular  Bank  v.  Hosie, 
112  Mich.  351. 

Such  demand  obligations  are,  as  between  the  maker  and  payee,  due 
and  payable  immediately. 

Winsted  Bank  v.  New  Hartford,  78  Conn.  319. 

Subd.  2. — A  note  given  by  an  insurance  company,  payable  in  such 
portions  and  at  such  times  as  the  board  of  directors  may  require  is  in 
effect  payable  upon  demand. 

Howard  v.  Edmunds,  24  N.  Y.  307. 

A  note  payable  at  the  maker's  convenience  is  payable  on  demand. 

Smithers  v.  Junker,  41  Fed.  Rep.  101. 

The  legal  intendment  that  a  note  is  payable  on  demand  cannot  be 
changed  by  parol  proof. 


FORM    AND   INTERPRETATION  35 

Sheldon  v.  Heaton,  88  Hun.  535 ;  See  also,  Roberts  v.  Snow,  28  Neb. 
425;  Messmore  v.  Morrison,  172  Pa.  St.  300;  James  v.  Brown,  11  Ohio 
St.  601 ;  Porter  v.  Porter,  51  Maine  376;  Libby  v.  Mekelborg,  28  Minn.  38; 
Self  V.  King,  28  Texas  552. 

§  27.  When  payable  to  order.  The  instrument  is  pay- 
able to  order  where  it  is  drawn  payable  to  the  order  of  a 
specified  person  or  to  him  or  his  order.  It  may  be  drawn 
payable  to  the  order  of: 

1 .  A  payee  who  is  not  maker,  drawer  or  drawee ;  or 

2.  The  drawer  or  maker;  or 

3.  The  drawee;  or 

4.  Two  or  more  payees  jointly;  or 

5.  One  or  some  of  several  payees;  or 

o.  The  holder  of  an  office  for  the  time  being. 

Where  the  instrument  is  payable  to  order  the  payee  must 
be  named  or  otherwise  indicated  therein  with  reasonable 
certainty. 

Variant. — The  Illinois  statute  adds  a  new  section  as  follows:  '7 — An 
instrument  payable  to  the  estate  of  a  deceased  person  shall  be  deemed 
payable  to  the  order  of  the  administrator  or  executor  of  the  estate." 


Subd.  I. — Where  a  note  is  drawn  to  the  maker's  own  order,  it  is  not 
complete  until  it  is  indorsed  by  him. 

See  Sec.  320. 

It  is  not  necessary  that  the  payee  be  designated  by  name.  If  his 
identity  can  be  ascertained  with  certainty,  it  is  sufficient. 

United  States  v.  White,  2  Hill  59 ;  Blackman  v.  Lehman,  63  Ala.  547. 

A  note  by  its  terms  payable  to  a  specified  person  omitting  the  words 
"or  order"  is  in  legal  effect  payable  to  him  or  his  order  and  indorsement 
is  effectual  to  transfer  it. 

Leavitt  v.  Putnam,  3  N.  Y.  498;  Chetty  on  Bills  136. 

Subd.  2. — A  note  payable  to  the  order  of  the  maker  does  not  come 
into  force  as  a  valid  note  until  indorsed  by  the  drawer. 
Sauffer  v.  Curtis,  198  Mass.  560. 

Subd.  4. — In  a  note  payable  to  two  persons  in  the  alternative,  the 
interest  is  deemed  joint. 

Passut  V.  Heuvner,  81  Misc.  249;  Willoughby  v.  Willoughby,  5  N.  H. 
244;  Osgood  v.  Pearsons,  70  Mass.  455;  Carr  v.  Bauer,  61  111.  App.  504; 
Westgate  v.  Healy,  4  R.  I.  523;  Colly(!r  v.  Cook,  28  Ind.  App.  272,  275. 


36  NEGOTIABLE   INSTKUMENTS    LAW 

See  also  Notes  Sec.  71. 

A  note  payable  to  A  and  B  must  be  sued  upon  and  transferred  by 
them  jointly  unless  in  case  of  partnership. 

Ryhner  v.  Feickert,  92  111.  305;  Tisdale  v.  Maxwell,  58  Ala.  40. 

Subd.  5- — A  note  payable  to  the  trustees  of  a  church,  or  their  col- 
lector, is  not  negotiable. 

Vorin  V.  Schoonover,  91  Kans.  530;  Noxon  v.  Smith,  127  Mass.  485. 


^^UA(T'^.^.<yupOL£^  ^:?^.  y^At^ 


y///    ''^^^^..r^'ny  y<?}rl^Jy 


,(l<>^,  ^£^A 


^^^a^J^cm^^6<^(^  ■'^:-^>^i^ 


In  the  foregoing  illustration  the  note  was  made  payable  to  the  Mutual 
Life  Insurance  Co.  or  Hugh  Blackman.  It  is  manifest  that  it  does  not 
fall  within  the  terms  of  this  section  for  the  reason  that  it  was  not  made 
payable  to  two  or  more  payees  or  to  their  order.  It  is  made  payable 
to  either  one  of  two  payees  and  under  Sec.  27  its  indorsement  by  either 
one  of  the  payees  named  therein  would  pass  title.  Under  the  last  named 
section  a  note  payable  to  one  or  some  of  several  payees  is  payable  to  the 
order  of  any  of  the  payees,  and  is  negotiable. 

Union  Bank  v.  Spies,  151  la.  178;  Bank  v.  Lightner,  74  Kans.  736. 

Were  the  note  payable  to  the  payees  jointly,  the  indorsement  of  both 
would  be  necessary. 

Where  a  promissory  note  payable  "to  the  order  of  A  or  B"  is  indorsed 
by  A  only,  to  one  who  takes  it  in  good  faith,  for  value  and  without  any 
notice  of  infirmity  in  the  instnmient  or  defect  in  title,  the  indorsee  is  a 
holder  in  due  course. 

Voris  V.  Schoonover,  91  Kans.  530;  Union  Bank  v.  Spies,  130  N.  W. 
(la.)  928. 

Subd.  6. — A  written  instrtiment  by  which  D  promises  to  pay  to  W, 
D  and  M,  "Trustees  of  the  Apalachicola  Land  Company  or  their  suc- 
cessors in  office,  or  order"  is  a  promissory  note. 

Davis  V.  Garr,  6  N.  Y.  124. 


FORM    AND    INTEEPRETATION  37 

§  28.  When  payable  to  bearer.  The  instrument  is  pay- 
able to  bearer: 

1.  When  it  is  expressed  to  be  so  payable;  or 

2.  When  it  is  payable  to  a  person  named  therein  or 
bearer;  or 

3.  When  it  is  payable  to  the  order  of  a  fictitious  or  non- 
existing  person,  and  such  fact  was  known  to  the  person  making 
it  so  payable;  or 

4.  When  the  name  of  the  payee  does  not  purport  to  be 
the  name  of  any  person;  or 

5.  When  the  only  or  last  indorsement  is  an  indorsement 
in  blank. 

Variant. — In  the  Illinois  statute,  subdivision  3  reads: — "When  it  is 
payable  to  the  order  of  a  person  known  by  the  drawer  or  maker  to  be 
fictitious  or  non-existent,  or  of  a  living  person  not  intended  to  have  any 
interest  in  it."  Subdivision  5  of  the  Illinois  statute  reads:  "When, 
although  originally  payable  to  order  it  is  indorsed  in  blank  by  the  payee 
or  subsequent  indorsee." 


Subd.  I. — A  note  "payable  to  the  order  of  A  or  bearer"  is  payable  to 
bearer  and  may  be  transferred  without  indorsement. 

Phoenix  Nat.  Bank  v.  Saucier,  Miss.,  59  So.  Rep.  91. 

Subd.  2. — A  note  payable  to  the  maker  thereof,  as  against  an  accom- 
modation indorser  having  knowledge  of  this  fact,  is  to  be  considered  as 
I)ayable  to  bearer;  and  is  valid,  although  negotiated  without  the  indorse- 
ment of  the  payee. 

Irving  Nat.  Bank  v.  Alley,  79  N.  Y.  536. 

Subd.  3. — This  rule  applies  only  to  paper  put  in  circulation  by  the 
maker  with  the  knowledge  that  the  name  of  the  payee  does  not  represent 
a  real  person.  The  maker's  intention  is  the  controlling  consideration 
which  determines  the  character  of  such  paper.  It  cannot  be  treated  as 
payable  to  bearer  unless  the  maker  knows  the  payee  to  be  fictitious  and 
actually  intends  to  make  the  paper  payable  to  a  fictitious  person.  Under 
the  English  statute  the  fact  governs.  Under  the  statutes  of  the  various 
states,  the  fact  coupled  with  knowledge  governs. 

Shipman  v.  Bank  of  New  York,  126  N.  Y.  318;  see  also,  Irving  Nat. 
Bank  v.  Alley,  79  N.  Y.  536;  PhilHps  v.  M.  N.  Bank,  146  N.  Y.  557;  Sea- 


38  NEGOTIABLE    INSTRUMENTS    LAW 

board  Nat.  Bank  v.  Bank  of  America,  193  N.  Y.  34;  Boles  v.  Harding,  201 
Mass.  103;  Armstrong  v.  Pomeroy  Nat.  Bank,  46  Ohio  St.  512;  Snyder  v. 
Com  Exchange  Bank,  221  Pa.  599;  see  Section  27. 

Where  the  name  of  the  drawer  of  a  check  is  forged  and  the  indorse- 
ment of  the  payee  also  forged,  it  is  apparent  that  the  forger  never  intended 
the  payee  to  have  an  interest  in  the  check,  and  he  is  therefore,  a  fictitious 
or  non-existent  person  within  the  meaning  of  this  subdivision,  and  the 
check  became  payable  to  bearer  even  though  the  payee  named  was  an 
actual  person. 

Trust  Co.  of  America  v.  Hamilton  Bank,  127  App.  Div.  (N.  Y.)  515. 

Where  a  check  is  payable  to  the  order  of  a  fictitious  or  non-existing 
person,  and  this  fact  was  known  to  the  person  who  signed  the  check,  the 
check  is  deemed  to  be  payable  to  bearer.  Although  such  a  check  appar- 
ently requires  an  indorsement  in  order  to  transfer  it,  it  is  in  reality  transfer- 
able without  indorsement  just  as  though  it  were  actually  made  payable  to 
bearer.  Consequently,  if  a  check  of  this  kind  is  indorsed  with  the  payee's 
name,  the  indorsement  is  immaterial  and  cannot  be  regarded  as  a  forgery, 
and,  if  the  drawee  bank  pays  the  check,  it  is  not  responsible  to  its  depositor 
for  the  amount  as  it  would  be  in  the  ordinary  case  of  paying  a  check  bearing 
a  forged  indorsement. 

Phillips  v.  Mercantile  Nat.  Bank,  140  N.  Y.  556,  35  N.  E.  Rep.  982, 
23  L.  R.  A.  584. 

A  check  may  be  regarded  as  payable  to  a  fictitious  person,  and  there- 
fore payable  to  bearer,  though  it  names  as  payee  an  actually  existing  person. 
This  happens  when  the  person  drawing  the  check  to  the  order  of  an  existing 
person  does  so  for  his  own  purposes  and  intends  that  the  payee  shall  have 
no  interest  whatever  in  the  check.  The  check  is  in  effect  payable  to  a 
nonentity. 

Phillips  v.  Mercantile  Nat.  Bank,  140  N.  Y.  556,  23  L.  R.  A.  584; 
Snyder  v.  Com  Exchange  Bank,  221  Pa.  599;  see  also  Shipman  v.  Bank, 
126  N.  Y.  318;  Jordon  Co.  v.  Nat.  Shawmut  Bank,  201  Mass.  397;  Arm- 
strong v.  Pomeroy  Nat.  Bank,  46  Oliio  St.  512;  Guaranty  State  Bank  v. 
Lively  (Tex.)  149  S.  W.  211. 

Subd.  4. — This  rule  is  intended  to  cover  cases  where  checks  are  payable 
to  "cash,"  "payroll"  or  to  "sundries." 

Willets  V.  Phoenix  Bank,  2  Duer  121;  Mechanics  Bank  v.  Stratton, 
2  Keyes  365. 

Subd.  5. — An  indorsement  in  blank  on  a  non-negotiable  note  does  not 
make  it  negotiable. 

Wettlaufler  v.  Baxter,  137  Ky.  362;  Johnson  v.  Lassiter,  155  N.  C.  47. 


FOEM    AND    INTERPRETATION  39 

§  29.  Terms,  when  sufficient.  The  instrument  need  not 
follow  the  language  of  this  chapter,  but  any  terms  are  suf- 
ficient which  clearly  indicate  an  intention  to  conform  to  the 
requirements  hereof. 

Variant. — The  statutes  of  Alabama,  Idaho,  Iowa,  North  Carolina  and 
Wyoming  have  inserted  the  word  "negotiable"  between  the  first  two  words. 
This  change  appears  to  be  superfluous.  Sec.  2  having  defined  instruments 
as  used  in  this  act  to  mean  "negotiable  instrument."  The  Wisconsin 
statute  adds  to  the  end  of  the  section:  "Memoranda  upon  the  face  or  back 
of  the  instrument,  whether  signed  or  not,  material  to  the  contract,  if  made 
at  the  time  of  delivery,  are  part  of  the  instrirment,  and  parol  evidence  is 
admissible  to  show  the  circumstances  under  which  they  were  made." 


A  negotiable  instrument  is  not  affected  by  reason  that  it  is  written  in  a 
foreign  language. 

Delebian  v.  Gala,  64  Md.  262,  or  whether  written  with  pencil  or  ink. 
Brown  v.  Butchers'  Bank,  6  Hill  443. 

A  written  statement  that  a  certain  amount  of  money  is  due  a  payee 
therein  named,  followed  by  the  signature  of  the  maker  of  the  statement, 
implies  that  the  money  is  due  from  the  maker  and  is  an  indebtedness  from 
him  to  the  person  to  whom  the  money  is  thus  acknowledged  to  be  due. 
The  acknowledgement  of  the  indebtedness  and  that  it  is  due  implies  a 
promise  to  pay  it  on  demand.     It  is  a  promissory  note  within  the  statute. 

Hageman  v.  Moon,  131  N.  Y.  462;  Gilbert  v.  Adams,  146  App.  Div. 
864. 

A  negotiable  bill  or  note  is  courier  without  luggage.  It  is  a  requisite 
that  it  be  framed  in  the  fewest  possible  words,  and  those  importing  the 
most  certain  and  precise  contract,  and  though  this  requisite  be  a  minor 
one,  it  is  entitled  to  weight  in  determining  a  question  of  intention. 

Overton  v.  Tyler,  3  Pa.  St.  346;  45  Am.  Dec.  645;  Woodbury  v. 
Roberts,  59  la.  348. 

§  30.  Date,  presumption  as  to.  Where  the  instrument 
or  an  acceptance  or  any  indorsement  thereon  is  dated,  such 
date  is  deemed  prima  facie  to  be  the  true  date  of  the  making, 
drawing,  acceptance  or  indorsement  as  the  case  may  be. 

A  check  has  no  inception  until  delivery  and  the  date  is  prima  facie 
evidence  of  the  time  it  was  made.  A  party  accepting  a  check  considerable 
time  after  its  date  is  put  upon  inquiry,  and  in  the  absence  of  explanation, 
takes  it  subject  to  any  defense  existing  as  between  the  payee  and  drawer. 


40  NEGOTIABLE   INSTRUMENTS    LAW 

Cowing  V.  Altman,  71  N.  Y.  435. 

If  there  is  no  such  date  the  law  will  deem  the  nearest  date  of  that 
month  the  date  intended.  A  note  dated  September  31st  will  be  construed 
as  to  have  been  intended  for  September  30th. 

Wagner  v.  Kenner,  2  Rob.  (La.)  120.    See  notes,  vSec.  25,  vSubd.  1. 

§  31.  Ante-dated  and  post-dated.  The  instrument  is 
not  invalid  for  the  reason  only  that  it  is  ante-dated  or  post- 
dated, provided  this  is  not  done  for  an  illegal  or  fraudulent 
purpose.  The  person  to  whom  an  instrument  so  dated  is 
delivered  acquires  the  title  thereto  as  of  the  date  of  delivery. 

Variant. — The  Missouri  statute  reads  "valid"  instead  of  "invalid," 
evidently  an  error. 


A  check  is  not  invalid  for  the  reason  only  that  it  is  antedated  or  post- 
dated, providing  this  is  not  done  for  an  illegal  or  fraudulent  purpose,  and  an 
indorsee  is  not  put  upon  inquiry  merely  because  of  the  negotiation  of  the 
check  prior  to  the  day  of  its  date. 

Albert  v.  Hoffman,  64  Misc.  87. 

A  postdated  check  may  be  negotiated  before  the  day  of  its  date. 

Brewster  v.  McCardle,  8  Wend.  475;  Passmore  v.  North,  13  East  517; 
Albert  v.  Hoffman,  64  Misc.  88. 

Where  a  bank  under  such  circumstances  pays  the  check  it  is  liable  to  a 
depositor  if  there  are  not  left  sufficient  funds  to  pay  a  subsequent  check 
dated  prior  to  the  postdated  check. 

Smith  V.  Maddox,  etc.  Banking  Co.,  135  Ga.  151. 

The  intent  of  the  section  is  to  cover  instruments  so  dated  by  mutual 
understanding  between  the  parties. 

Bank  of  Houston  v.  Day,  145  Mo.  App.  410. 

But  if  such  false  date  is  inserted  to  evade  the  law  it  is  void  as  to  all 
persons  having  notice. 

Serle  v.  Norton,  9  M.  &  W.  309. 

§  32.  When  date  may  be  inserted.  Where  an  instru- 
ment expressed  to  be  payable  at  a  fixed  period  after  date  is 
issued  undated,  or  where  the  acceptance  of  an  instrument 
payable  at  a  fixed  period  after  sight  is  undated,  any  holder 
may  insert  therein  the  true  date  of  issue  or  acceptance,  and 
the  instrument  shall  be  payable  accordingly.  The  insertion 
of  a  wrong  date  does  not  avoid  the  instrument  in  the  hands  of 


FORM    AND    INTERPRETATION  41 

a  subsequent  holder  in  due  course;  but  as  to  him,  the  date 
so  inserted  is  to  be  regarded  as  the  true  date. 

A  note  made  June  10th  and  dated  June  ,  the  day  of  the  month 

left  blank,  was  indorsed  for  accommodation  and  thereafter  transferred  by 
the  maker  for  value.  The  holder  without  the  knowledge  of  the  other 
parties  thereto  filled  the  blank  date  with  the  figure  "1".  Held,  there  was 
an  implied  authorization  to  fill  the  blank  date,  and  the  indorsers,  who 
delivered  the  note  in  blank,  were  bound  by  the  date  filled  in. 

Page  V.  Morrell,  3  Abbt.  Ct.  App.  Dec.  433;  Mitchell  v.  Culver, 
7  Cowen,  336;  Bank  of  Houston  v.  Day,  145  Mo.  App.  410;  See  Notes, 
Sec.  33. 

Where  a  note  is,  before  delivery,  made  complete  in  accordance  with 
its  general  character,  and  is  free  from  words  and  imscored  blanks  reason- 
ably indicating  incompleteness,  the  unauthorized  addition  of  words  or 
figures  by  filling  of  unoccupied  blanks  or  parts  of  blanks,  or  otherwise,  is 
such  an  alteration,  if  material,  as  will  make  the  paper  void  in  the  hands  of 
the  forger  or  any  one  claiming  under  him. 

Kindler  v.  First  Nat.  Bank,  109  N.  E.  (Ind.)  68. 

§  33.  Blanks;  when  may  be  filled.  Where  the  instru- 
ment is  wanting  in  any  material  particular,  the  person  in 
possession  thereof  has  a  prima  facie  authority  to  complete  it 
by  filling  up  the  blanks  therein.  And  a  signature  on  a  blank 
paper  delivered  by  the  person  making  the  signature  in  order 
that  the  paper  may  be  converted  into  a  negotiable  instrtiment 
operates  as  a  prima  facie  authority  to  fill  it  up  as  such  for  any 
amount.  In  order,  however,  that  any  such  instrument,  when 
completed,  may  be  enforced  against  any  person  who  became 
a  party  thereto  prior  to  its  completion,  it  must  be  filled  up 
strictly  in  accordance  with  the  authority  given  and  within  a 
reasonable  time.  But  if  any  such  instrtmient,  after  comple- 
tion, is  negotiated  to  a  holder  in  due  course,  it  is  valid  and 
effectual  for  all  purposes  in  his  hands,  and  he  may  enforce  it 
as  if  it  had  been  filled  up  strictly  in  accordance  with  the  author- 
ity given  and  within  a  reasonable  time. 

Variant. — The  Illinois  statute  adds  the  words  "issued  or"  before 
negotiable  in  the  last  sentence.  The  South  Dakota  statute  reads  as 
follows: — One  who  makes  himself  a  party  to  an  instrument,  intended  to  be 


42  NEGOTIABLE    INSTRUMENTS   LAW 

negotiated  but  which  is  left  wholly  or  partly  in  blank  for  the  purpose  of 
falling  in  afterwards,  is  liable  upon  the  instrument  to  an  indorsee  thereof 
in  due  course,  in  whatever  manner  and  at  whatever  time  it  may  be  filled 
so  long  as  it  remains  negotiable  in  form.  The  Wisconsin  statute  adds 
"prior  to  negotiation"  before  the  words  "by  filling"  and  omits  the  words 
"prima  facie"  in  the  second  sentence. 


When  considering  this  section  it  is  important  to  bear  in  mind  the  dis- 
tinction which  exists  between  (1)  those  notes  in  which  obvious  blanks 
are  left  at  the  time  when  they  are  made  or  indorsed,  of  such  a  character  as 
manifestly  to  indicate  that  the  instruments  are  incomplete  until  such 
blanks  shall  be  filled  up,  and  (2)  those  notes  which  are  apparently  com- 
plete, and  which  can  be  regarded  as  containing  blanks  only  because  the 
written  matter  does  not  so  fiilly  occupy  the  entire  paper  as  to  preclude 
the  insertion  of  additional  words  or  figures,  or  both. 

One  who  signs  or  indorses  a  note  of  the  first  class  is  liable  to  bona 
fide  holders  thereof,  on  the  doctrine  of  implied  authority,  while  in  other 
cases  relating  to  notes  of  the  second  class,  the  liability  of  the  maker  or 
indorser  for  the  amount  of  the  note  has  increased  by  filling  up  unoccupied 
spaces  therein  is  placed  upon  the  doctrine  of  negligence. 

Cannon  v.  Grigsley,  116  111.  151;  National  Exchange  Bank  v.  Lester 
194  N.  Y.  464;  Winter  v.  Poole,  104  Ala.  580;  Stanton  v.  Stone,  61  Pac.  481 ; 
Carson  v.  Grant  Bank,  96  Ky.  487;  Weidman  v.  Symes,  120  Mich.  657; 
Lowden  v.  Nat.  Bank,  38  Kansas  533. 

As  to  the  liability  of  a  party  who  has  endorsed  or  become  surety  upon 
a  note  in  which  there  were  spaces  (not  obvious  blanks)  that  permitted 
fraudulent  insertions  in  enlarging  the  amount,  see 

Garrard  v.  Haddan,  67  Pa.  St.  82;  Yocum  v.  Smith,  63  111.  321; 
Scotland  v.  O'Connel,  23  Mo.  App.  165;  Hackett  v.  Bank  of  Louisville, 
114  Ky.  193;  Burrows  v.  Klunk,  70  Md.  451.     See  Section  205  and  notes. 

An  uncompleted,  negotiable  instrument  sent  by  a  maker  residing  in 
Massachusetts  to  an  agent  in  Canada  to  be  filled  out  and  delivered  to  the 
payee  there  is  subject  to  Canadian  laws  governing  the  completion  of  negoti- 
able instnmients. 

Perry  v.  Pye,  215  Mass.  403. 

In  Abbott  V.  Rose,  62  Me.  194,  16  Am.  Rep.  427,  the  defendant  vol- 
imtarily  signed  a  blank  out  of  which  a  promissory  note  was  made  when  he 
supposed  the  blank  was  to  be  filled  out  for  another  purpose.  In  that  case 
the  court  said: 

"The  note,  then,  owed  its  existence  to  some  instrumentality  on  his 
part.  The  perfected  note  was  the  result  of  his  putting  his  name  to  the 
blank;  a  result  which  might  have  been  contemplated  as  the  natural  and 


FOEM    AND    INTERPRETATION  43 

even  probable  effect  of  such  an  act.  The  signature  contributed  to  that 
end  very  materially,  and  that  end  was  reached  by  the  confidence,  misplaced 
though  it  was,  which  he  had  in  the  payee.  If,  then,  this  act  resulted  from 
negligence,  or  a  want  of  due  care  on  the  part  of  the  defendant,  however 
innocent  he  might  be,  he  would  be  responsible  to  any  person  equally 
innocent  with  himself  who  is  injured  by  that  act.  This  results  not  only 
when  the  person  committing  the  fraud  is  the  appointed  agent  of  the  de- 
fendant, but  where  no  such  relation  exists." 

Amount. — One  who  intrusts  another  with  his  acceptance  in  blank  is 
responsible  to  a  bona  fide  holder,  although  the  blank  is  filled  by  a  sum 
exceeding  that  agreed  upon. 

Van  Duzer  v.  Howe,  21  N.  Y.  531;  Trust  Co.  ot  America  v.  Conklin, 
65  Misc.  1. 

A  promissory  note  with  the  time  and  place  of  pa^nnent  in  blank  and 
given  by  the  indorser  to  the  maker,  who  in  addition  to  filling  the  blanks 
inserted  the  words  "with  interest."  Held,  that  the  delivery  of  the  note 
gave  the  holder  implied  authority  to  fill  the  blanks  by  inserting  any  time 
and  place  he  chose,  but  it  did  not  authorize  the  addition  of  the  words 
"with  interest,"  and  that  such  addition  was  a  material  alteration  which 
invalidated  the  note  in  the  absence  of  proof  of  some  authority  therefor, 
aside  from  the  delivery. 

McGrath  v.  Clark,  56  N.  Y.  38;  Meyer  v.  Huenke,  55  N.  Y.  412; 
Dmnbrow  v.  Geib,  72  Misc.  400;  Columbia  Distilling  Co.  v.  Rech,  151 
App.  Div.  128;  Exchange  Bank  v.  Little,  164  S.  W.  731. 

The  courts  distinguish  between  notes  in  which  obvious  blanks  are  left 
and  notes  which  are  apparently  complete,  but  in  which  there  is  space  to 
insert  additional  writing. 

National  Exchange  Bank  v.  Lester,  194  N.  Y.  465;  Greenfield  Savings 
Bank  v.  Stowell,  123  Mass.  196;  Garrard  v.  Hadden,  67  Pa.  St.  82; 
Harrington  v.  Breslin,  88  Neb.  47;  Weyerhauser  v.  Dunn,  100  N.  Y.  50. 

Where  the  amount  is  stated  in  figures  on  the  space  on  the  margin  and  a 
blank  space  is  left  for  the  amount  in  the  body  of  the  instrument,  it  is  not 
complete  until  such  amount  is  written. 

Chestnut  v.  Chestnut,  104  Va.  539;  Hepler  v.  Mt.  Carmel  Bank,  97 
Pa.  St.  420. 

But  the  holder  is  not  authorized  to  write  in  a  larger  amount  than 
called  for  by  the  figures. 

Norwich  Bank  v.  Hyde,  13  Conn.  284;  Prim  v.  Hamil,  32  S.  Rep. 
(Ala.)  652 ;  Toomer  v.  Rutland,  29  A.  Rep.  (Ala.)  722 ;  Nat.  Bank  v.  Carson, 
60  Mich.  432. 

Where  a  check  with  the  amount  in  blank  was  given  by  a  woman  to 
her  husband  instructing  him  to  deliver  it  to  a  creditor  in  payment  of  her 


44  NEGOTIABLE   INSTRUMENTS   LAW 

account,  and  it  was  delivered  by  the  husband  to  be  used  in  the  payment  of 
his  own  debt,  and  allowed  the  creditor  to  insert  such  amount.  Held,  that 
the  instrument  was  incomplete,  and  in  an  action  by  the  creditor  against 
the  woman  for  payment  of  her  indebtedness  she  could  introduce  evidence 
to  show  that  by  the  authority  given  by  her  to  her  husband,  he  had  no 
right  to  apply  it  other  than  for  her  debt. 

Boston  Steel  &  Iron  Co.  v.  Steuer,  183  Mass.  140;  Kramer  v.  Schnitzer, 
109  N.  E.  Rep.  695. 

The  payee  of  a  check  which  was  originally  delivered  with  the  amount 
left  blank,  is  not  under  the  burden  of  showing  authority  to  fill  in  the  blank. 

Madden  v.  Gaston,  137  App.  Div.  (N.  Y.)  294;  Davison  v.  Lanier, 
4  Wall  447;  Business  Men's  League  v.  Sragow,  153  N.  Y.  Supp.  231. 

The  rule  that  the  bona  fide  holder  of  an  incomplete  instrument,  nego- 
tiable but  for  some  lack  capable  of  being  supplied,  has  implied  authority 
to  supply  the  omission,  and  to  hold  the  maker  thereon,  only  applies  where 
the  latter  has  by  his  own  act,  or  the  act  of  another,  authorized,  confided  in 
or  invested  with  apparent  authority  by  him,  put  the  instniment  in  circula- 
tion as  negotiable  paper,  and  does  not  apply  where  the  paper  has  been 
stolen. 

Linick  v.  Nutting,  140  App.  Div.  (N.  Y.)  265;  Solley  v.  Terrill,  95  Me. 
553,  55  L.  R.  A.  730;  Citizens  Bank  v.  Moreland,  71  S.  W.  (Ky.)  102; 
Nichols  V.  Frothingham,  45  Me.  220;  Market  Nat.  Bank  v.  Sargent,  85 
Me.  349;  Smith  v.  Willing,  123  Wis.  377. 

Sometimes  an  alteration  in  a  note,  seemingly  material,  and  such  as 
may  prima  facie  render  it  void,  is  innocent  and  does  not  vitiate  the  instru- 
ment. So  it  is,  when  it  is  done  to  correct  a  mistake  in  penning  the  note, 
or  to  make  it  express  the  real  bargain  of  the  parties,  or  to  give  the  proper 
legal  form  to  their  contract.  In  such  a  case  the  payee  has  the  right  to 
enforce  it. 

Booth  V.  Powers,  56  N.  Y.  22-31;  Levy  v.  Arons,  81  Misc.  166. 

But  where  in  a  check  "or  order"  is  changed  to  "bearer,"  see  Builders 
Lime  &  Cement  Co.  v.  Welmer,  151  N.  W.  (la.)  100. 

If  one  signs  a  negotiable  note  in  blank  amount,  the  payee  has  authority 
prima  facie,  to  complete  it,  in  a  reasonable  time,  by  filling  in  the  amount 
authorized,  and  if  he  fills  it  in  any  other  sum  he  cannot  hold  the  maker  (or 
anyone  else  who  became  a  party  to  it  before  it  was  completed)  unless, 
after  its  completion,  it  is  negotiated  to  a  holder  in  due  course,  in  which 
case,  the  maker  (or  those  becoming  parties  to  it  before  its  completion)  can 
be  held  regardless  of  whether  the  amount  was  authorized. 

Exchange  Bank  v.  Robinson,  185  Mo.  App.  585. 


FOEM    AND    INTERPRETATION  45 

Place.— In  Redlich  v.  Doll,  54  N.  Y.  235  held,  that  a  note  perfect  in 
form  except  the  filling  of  the  blank  intended  for  place  of  pa3mient  carried 
upon  its  face  an  implied  authority  for  any  bona  fide  holder  to  insert  the  place 
of  pa3mient.  Even  if  the  blank  be  filled  contrary  to  agreement  or  intention 
of  the  original  parties,  the  maker  is  held  to  any  bona  fide  holder  for  value, 
upon  the  principle  that,  where  one  or  two  innocent  parties  must  suffer  by 
the  fraud  or  wrong  of  a  third  person,  the  one  who  put  in  the  power  of  such 
third  person  to  commit  the  fraud  or  wrong  must  bear  the  loss. 

Diamond  Distilleries  Co.  v.  Gott,  (Ky.)  126  S.  W.  131;  Van  Duzer 
V.  Howe,  21  N.  Y.  531;  Winter  v.  Poole,  104  Ala  580. 

"Business  men,  who  place  their  signatures  to  blanks,  suitable  for 
negotiable  bills  of  exchange  or  promissory  notes,  and  entrust  them  to  their 
correspondents  to  raise  their  money  at  their  discretion  ought  to  under- 
stand the  operation  and  effect  of  this  rule,  and  not  to  expect  that  courts  of 
justice  will  fail  in  such  cases  to  give  it  due  application." 

Bank  of  Pittsburgh  v.  Neal,  63  U.  S.  96;  Redlich  v.  Doll,  54  N.  Y.  234. 

Parties. — This  section  does  not  authorize  a  person  to  alter  a  note 
payable  to  several  payees  jointly  to  make  it  payable  to  himself. 

Nat.  Bank  v.  Gridley,  112  App.  Div.  (N.  Y.)  398. 

But  he  may  insert  his  own  name  in  a  blank  space  left  for  the  name  of 
the  payee. 

Boyde  v.  McCann,  10  Md.  118. 

Signature. — While  it  has  been  held  that  the  delivery  of  a  promissory 
note  with  blanks  unfilled  implies  authority  to  complete  it,  yet  it  can  hardly 
be  claimed  that  one  drawing  a  promissory  note  which  is  unsigned,  and  falls 
into  the  hands  of  another,  thereby  authorizies  the  holder  to  attach  the 
maker's  signature  or  add  anything  which  is  incomplete  in  its  execution. 

Davis  Sewing  Machine  Co.  v.  Best,  105  N.  Y.  67. 

In  Abbott  V.  Rose,  62  Me.  194,  16  Am.  Rep.  427,  the  defendant  vol- 
untarily signed  a  blank  out  of  which  a  promissory  note  was  made  when  he 
supposed  the  blank  was  to  be  filled  out  for  another  purpose.  In  that  case 
the  court  said : 

"The  note,  then,  owed  its  existence  to  some  instrumentality  on  his 
part.  The  perfected  note  was  the  result  of  his  putting  his  name  to  the 
blank;  a  result  which  might  have  been  contemplated  as  the  natural  and 
even  probable  effect  of  such  an  act.  The  signature  contributed  to  that 
end  very  materially,  and  that  end  was  reached  by  the  confidence,  mis- 
placed though  it  was,  which  he  had  in  the  payee.  If,  then,  this  act  resulted 
from  negligence,  or  a  want  of  due  care  on  the  part  of  the  defendant,  however 
innocent  he  might  be,  he  would  be  responsible  to  any  person  equally 


46  NEGOTIABLE    INSTKUMENTS   LAW 

innocent  with  himself  who  is  injured  by  that  act.  This  results  not  only 
when  the  person  committing  the  fraud  is  the  appointed  agent  of  the  defend- 
ant, but  where  no  such  relation  exists." 

In  the  same  case  the  covirt  cited  wdth  approval  the  case  of  Trigg  v. 
Taylor,  27  Mo.  245,  72  Am.  Dec.  263,  in  which  that  court  declared: 

"If,  however,  a  bill,  note,  or  check  is  so  negligently  drawn,  with 
blank  spaces  left  for  the  addition  of  other  words  or  figures,  that  alterations 
can  be  made  so  as  not  to  excite  suspicion,  the  loss  ought  to  fall  on  the  person 
in  fault,  according  to  the  familiar  rule  that,  when  one  of  two  persons  must 
suffer  by  act  of  a  third,  the  one  who  affords  the  means  to  the  wrongdoer 
must  sustain  the  loss." 

The  authority  implied  by  a  signature  to  a  blank  note,  and  the  credit 
given,  are  so  extensive  that  the  party  so  signing  wall  be  bound  to  a  holder 
for  value  in  due  course,  although  such  note  was  only  authorized  to  be  used 
for  a  purpose  different  from  that  to  which  it  has  been  perverted. 

Rusmissel  v.  White  Oak  Stove  Co.,  92  S.  E.  672. 

Date. — One  who  signs  or  indorses  a  note  in  blank,  authorizes  the 
person  to  whom  it  is  delivered  to  fill  the  blanks  in  respect  essential  to  the 
completeness  of  the  note  as  such;  but  in  the  absence  of  express  authority 
or  consent,  no  authority  can  be  implied  from  delivery  to  insert  a  special 
agreement  not  so  essential. 

Weyerhauser  v.  Dunn,  100  N.  Y.  151 ;  see  notes  to  Section  32. 

The  absence  of  a  date  upon  a  negotiable  instrument  at  its  inception, 
or  the  fact  that  it  is  post  or  antedated,  may  not  be  material  upon  the  ques- 
tion of  its  validity ;  but  when  a  date  has  once  been  inserted  and  its  time  of 
payment  has  been  fixed,  such  date  is  material  and  cannot  be  altered  with- 
out the  consent  of  the  maker. 

Dan.  Neg.  Inst.  1376-7,  1577-8;  Bank  of  Houston  v.  Day,  145  Mo. 
App.  410;  Eastman  v.  Shaw,  65  N.  Y.  522;  Miller  v.  Gilleland,  9  Penn.  St. 
119;  Crawford  v.  West  Side  Bank,  100  N.  Y.  51 ;  see  Section  206. 

Where  an  undated  note  in  which  blanks  were  left  for  the  name  of  the 
payee  and  time  of  payment,  after  indorsement  and  with  the  assent  of  the 
indorser,  was  delivered  to  plaintiff  for  value,  with  authority  to  fill  in  the 
blanks  at  any  time  she  needed  the  money,  she,  under  this  section,  had  the 
right  to  complete  the  note  by  filling  in  the  blanks ;  and  the  indorser  is  liable 
for  the  amount  of  the  note. 

Usefof  V.  Herzenstein,  65  Misc.  45;  Nat.  Exchange  Bank  v.  Lester, 
194  N.  Y.  471;  Johns  v.  Ha\Hnson,  20  Ind.  317. 

Reasonable  time. — The  burden  is  on  the  payee  to  show  they  were 
filled  in  within  a  reasonable  time.  A  delay  of  eight  months,  unexplained, 
is  not  within  reasonable  time. 


FORM    AND    INTEEPRETATION  47 

Madden  v.  Gaston,  137  App.  Div.  296;  Union  Trust  Co.  v.  McAneny, 
145  App.  Div.  412. 

Incomplete  instruments  generally. — If  a  bill,  note  or  check  is  so 
negligently  drawn  with  blank  space  left  for  the  addition  of  other  words, 
that  they  can  be  filled  in  without  suspicion,  the  loss  ought  to  fall  on  the 
person  in  fault,  according  to  the  familiar  nile,  that  when  one  or  two  persons 
must  suffer  by  the  act  of  a  third,  the  one  who  affords  the  means  must 
sustain  the  loss. 

Trigg  V.  Taylor,  27  Mo.  245,  72  Am.  Dec.  263;  Kellogg  v.  Curtis,  65 
Me.  59;  Yocum  v.  Smith,  63  111.  321;  Knoxville  Nat'l  Bank  v.  Clark,  51 
Iowa  264;  Mannussier  v.  Wright,  158  111.  App.  219;  Hackett  v.  First  Nat'l 
Bank,  114  Ky.  193;  Burrows  v.  Klxmk,  70  Md.  451;  Holmes  v.  Tnmiper, 
22  Mich.  427;  Stone  v.  Sargent,  220  Mass.  445;  Harrington  Nat'l.  Bank  v. 
Breslin,  88  Neb.  47;  Redlich  v.  Doll,  54  N.  Y.  238;  Town  of  Solon  v. 
Williamsburg  Bank,  114  N.  Y.  122;  Critten  v.  Chemical  Nat'l  Bank,  171 
N.  Y.  219;  Angle  v.  N.  W.  Mut.  Life  Ins.  Co.,  92  U.  S.  330;  Abbott  v. 
Rose,  62  Me.  194,  16  Am.  Rep.  427;  Johnson  v.  Hoover,  117  N.  W.  (la.) 
277. 

§  34.  Incomplete  instrument  not  delivered.  Where  an 
incomplete  instnmient  has  not  been  delivered  it  will  not,  if 
completed  and  negotiated,  without  authority,  be  a  valid  con- 
tract in  the  hands  of  any  holder,  as  against  any  person  whose 
signature  was  placed  thereon  before  delivery. 

Variant. — The  Wisconsin  statute  substitutes  the  word  "negotiation" 
for  "delivery"  and  the  end  of  the  sentence. 

A  negotiable  instrument  must  be  a  complete  and  perfect  instrument 
when  it  is  issued,  or  there  must  be  authority  reposed  in  some  one  after- 
ward to  supply  anything  needed  to  make  it  perfect. 

Lednich  v.  McKim,  53  N.  Y.  313;  Davis  Sewing  Machine  Co.  v.  Best, 
105  N.  Y.  67;  Nor\^4ch  Bank  v.  Hyde,  13  Conn.  279;  Dan.  Neg.  Int., 
Sections  841,  842. 

While  the  possession  of  a  negotiable  instnmient  is  prima  facie  evidence 
of  delivery,  yet  if  it  is  shown  that  it  was  never  actually  delivered,  no 
recovery  can  be  had  upon  it  in  the  hands  of  an  innocent  holder  for  value. 

Linick  v.  Nutting,  140  App.  Div.  (N.  Y.)  265;  Burson  v.  Htmtington, 
21  Mich.  415; 

Where  a  verbal  agreement  is  made  that  a  promissory  note  delivered 
by  the  maker  to  the  payee  shall  not  be  effective  tmtil  others  have  signed, 
it  will  have  no  validity  between  the  parties  unless  the  conditions  are  com- 
plied with. 

Hodge  v.  Smith,  130  Wis.  326;  see  notes.  Sections  SZ,  35,  94. 


48  NEGOTIABLE    INSTRUMENTS    LAW 

§  35.  Delivery ;  when  effectual ;  when  presumed.  Every 
contract  on  a  negotiable  instrument  is  incomplete  and  revo- 
cable until  delivery  of  the  instrument  for  the  purpose  of  giving 
effect  thereto.  As  between  immediate  parties,  and  as  regards  a 
remote  party  other  than  a  holder  in  due  course,  the  delivery, 
in  order  to  be  effectual,  must  be  made  either  by  or  under  the 
authority  of  the  party  making,  drawing,  accepting  or  indors- 
ing, as  the  case  may  be;  and  in  such  case  the  delivery  may  be 
shown  to  have  been  conditional,  or  for  a  special  purpose  only, 
and  not  for  the  purpose  of  transferring  the  property  in  the 
instriunent.  But  where  the  instrimient  is  in  the  hands  of  a 
holder  in  due  course,  a  valid  delivery  thereof  by  all  parties 
prior  to  him  so  as  to  make  them  liable  to  him  is  conclusively 
presumed.  And  where  the  instrument  is  no  longer  in  the 
possession  of  a  party  whose  signature  appears  thereon,  a  valid 
and  intentional  delivery  by  him  is  presumed  until  the  contrary 
is  proved. 

Variant. — The  Kansas  statute  strikes  out  the  third  sentence.  The 
North  Carolina  statute  omits  ''accepting"  in  the  second  sentence.  The 
South  Dakota  statute  substitutes  for  the  third  sentence  commencing  with 
the  word  "But"  as  follows:  "An  indorsee  of  a  negotiable  instrument  in 
due  course,  acquires  an  absolute  title  thereto,  so  that  it  is  valid  in  his  hands, 
notwithstanding  any  provision  of  law  making  it  generally  void  or  voidable, 
and  notwithstanding  any  defect  in  the  title  of  the  person  from  whom  he 
acquired  it." 


Delivery  being  the  final  act  in  the  execution  of  a  negotiable  instrument 
is  as  essential  as  the  signature  of  the  maker. 

Purvance  v.  Jones,  21  N.  E.  (Ind.)  1099. 

There  is  no  doubt  that,  by  virtue  of  the  rtile  embodied  in  this  section, 
the  rule  of  law  governing  ordinary  contracts  or  instruments,  that  a  con- 
tract becomes  effectual  only  by  actual  delivery,  is  modified,  at  least  to  the 
extent  that,  where  a  negotiable  instrument  is  in  the  hands  of  a  "holder  in 
due  course"  a  valid  delivery  thereof  by  all  parties  prior  to  him,  so  as  to 
make  them  liable  to  him,  is  conclusively  presumed. 

Notes  properly  signed,  sealed  and  placed  in  an  envelope  properly 
addressed  to  the  payee,  and  delivered  to  the  United  States  mail  at  a  certain 
place  with  postage  prepaid,  are  deemed  delivered  at  such  time  and  place. 

Garrigue  v.  Kellar,  108  Ind.  324. 


FORM    AND    INTERPRETATION  49 

Necessary  to  Deliver. — A  check  or  note  has  no  inception  until  delivery, 
and  for  all  legal  purposes  it  is  to  be  considered  as  made  on  the  date  of  its 
delivery. 

Cowing  V.  Altman,  71  N.  Y.  441;  Burr  v.  Beelder,  264  III.  230. 

As  between  the  original  parties,  delivery  involves  not  only  a  change 
of  possession,  but  also  an  intent  that  the  note  shall  become  effective. 

Bombolaski  v.  Bank,  103  N.  E.  (Ind.)  422. 

When  delivered  to  the  payee  the  promise  became  effective,  and  it  is 
then,  and  not  before,  become  a  chose  in  action,  valid  and  effective. 

Wilcox  V.  Corwin,  117  N.  Y.  503;  Eastman  v.  Shaw,  65  N.  Y.  528; 
Burton  v.  Huntington,  21  Mich.  416;  Griffith  v.  Kellogg,  39  Wis.  290; 
Grannis  v.  Stevens,  216  N.  Y.  583. 

Actual  or  constructive  delivery  of  an  indorsed  promissory  note  pay- 
able to  order  is  essential  to  vest  title;  but  delivery  must  be  presumed 
prima  facie,  from  possession  of  a  properly  indorsed  note,  which  presump- 
tion will  prevail,  in  the  absence  of  rebutting  evidence. 

Chandler  v.  Hedrick,  187  Mo.  App.  665;  Newcomb  v.  Fox,  1  App. 
Div.  (N.  Y.)  389;  Madden  v.  Gaston,  137  App.  Div.  (N.  Y.)  294. 

Where  the  maker  of  a  promissory  note  allows  the  same  to  get  into 
circulation,  he  is  liable  to  a  bona  fide  holder  upon  the  ground  that  he  is 
estopped  by  his  own  negligence  to  deny  a  valid  delivery.  The  maxim 
declaring  that  where  one  of  two  innocent  persons  must  suffer  by  the  reason 
of  the  wrong  of  a  third  party,  he  whose  acts  made  the  wrong  possible 
should  bear  the  loss,  will  apply. 

See  Section  91;  Palmer  v.  Poor,  121  Ind.  135;  Dodd  v.  Dunn,  71  Wis. 
578. 

The  delivery  of  a  check  by  the  maker  to  his  agent  is  not  delivery  to 
the  payee. 

Mutual  Life  Ins.  Co.  v.  Barry,  211  Mass.  306. 

A  delivery  of  a  note  to  an  agent  of  the  payee,  is  a  sufficient  delivery. 

Quality  Co.  v.  Corkill,  182  111.  App.  175. 

Stolen  or  lost  before  delivery. — The  courts  are  not  unanimous  on  the 
question  of  liability  of  the  maker  of  negotiable  paper  lost  or  stolen  before 
delivery.     See, 

Kinyon  v.  Wohlford,  10  Am.  St.  Rep.  (Minn.)  165;  Magee  v.  Badger, 
34  N.  Y.  247;  Shippley  v.  Carroll,  45  III.  285;  Cook  v.  United  States,  91 
U.  S.  389;  Rockwell  Bank  v.  Citizens  Co.,  45  Atl.  (Conn.)  361;  Cline  v. 
Guthrie,  42  Ind.  227;  Caulkins  v.  Whistler,  29  la.  495;  Burson  v.  Hunting- 
ton, 4  Am.  Rep.  (Mich.)  497;  Palmer  v.  Poor,  22  N.  E.  (Ind.)  984,  6  L.  R. 
A.  469;  Salley  v.  Terrill,  50  Atl.  (Me.)  896;  Davis  Machine  Co.  v.  Best, 
105  N.  Y.  59;  Branch  v.  Commissioners,  80  Va.  427;  Dodd  v.  Dunn,  37 


50  NEGOTIABLE   INSTRUMENTS   LAW 

N.  W.  (Wis.)  430;  Walters  v.  Tielkmeyer,  72  Mo.  App.  371;  Wheeler  v. 
Guild,  37  Mass.  545;  Poess  v.  12th  Ward  Bank,  86  N.  Y.  Supp.  857;  Pollard 
V.  Vinton,  105  U.  S.  7. 

In  Burson  v.  Hunting,  21  Mich.  415,  where  a  note  was  taken  by  a 
payee  from  a  table  in  the  room  of  the  maker,  without  his  authority  or 
consent,  and  transferred  to  an  innocent  holder  for  value,  on  the  question 
of  the  maker's  liability  the  court  said:  "The  wrongful  act  of  a  thief  or  a 
trespasser  may  deprive  the  holder  of  his  property  in  a  note  which  has 
once  become  a  note,  or  property,  by  delivery,  and  may  transfer  the 
title  to  an  innocent  purchaser  for  value.  But  a  note  in  the  hands  of  the 
maker  before  delivery  is  not  property,  nor  the  subject  of  ownership,  as 
such;  it  is,  in  law,  but  a  blank  piece  of  paper.  Can  the  theft  or  wrongful 
seizure  of  this  paper  create  a  valid  contract  on  the  part  of  the  maker 
against  his  will,  where  none  existed  before?  There  are  undoubtedly  cases 
where  the  negligence  of  the  maker  in  allowing  an  undelivered  note  to  get 
into  circulation  might  justly  estop  him  from  setting  up  non-delivery, 
as  if  he  were  knowingly  to  throw  it  into  the  street,  or  otherwise  leave  it 
accessible  to  the  public." 

See  also  Linick  v.  Nutting  Co.,  140  App.  Div.  (N.  Y.)  265;  Note 
Section  96. 

But  in  Schaeffer  v.  Marsh,  90  Misc.  307,  in  a  review  of  the  foregoing 
cases  held,  that  if  the  instrument  is  complete,  except  as  to  delivery,  the 
non-delivery  is  not  a  defense  as  against  a  bona  fide  holder  in  due  course 
for  value. 

A  want  of  delivery  cannot  be  urged  as  a  defense  against  a  bona  fide 
holder  of  a  negotiable  note  where  it  appears  that  the  note  got  into  cir- 
culation through  the  fault  or  negligence  of  the  defendant. 

Clark  V.Johnson,  54  111.  296;  Bombolaski  v.  Nat.  Bank,  55  Ind.  App. 
182;  Palmer  v.  Poor,  121  Ind.  135. 

A  holder  in  due  course  of  commercial  paper  may  recover  thereon, 
although  the  instrument  was  originally  stolen  from  the  maker,  for  the 
reason  that  where  one  or  two  innocent  persons  must  suffer  by  the  wrong 
of  another,  he  whose  act  made  the  loss  possible  must  suffer. 

Angus  V.  Downs,  85  Wash.  75. 

A  note  ordinarily  has  no  legal  existence  until  delivered  pursuant  to 
the  intentions  of  the  parties. 

Stockton  V.  Turner,  153  N.  W.  641. 

Conditional  Delivery. — A  promissory  note  may  be  delivered  upon  a 
condition,  the  observance  of  which  is  essential  to  its  validity  as  between  the 
parties  to  the  paper,  and  where  the  answer  contains  an  explicit  denial  of 


FORM    AND   INTERPRETATION  51 

delivery  of  the  note  as  alleged  in  the  complaint,  and  avers  a  delivery  to  a 
different  person  upon  a  condition  which  has  not  been  fulfilled,  it  raises  a 
question  of  fact  for  the  jury. 

Niblock  V.  Sprague,  200  N.  Y.  390;  Bookstaver  v.  Jayne,  60  N.  Y.  146. 

Where  the  maker  of  a  promissory  note  in  a  suit  against  him  by  the 
payee  pleads  that  the  delivery  was  conditional  and  the  non-fulfillment  of 
the  condition,  such  conditional  delivery  may  be  proved  by  parol  proof, 
and  the  parol  proof  is  not  deemed  an  attempt  to  vary  or  contradict  the 
written  contract  between  the  parties. 

Higgins  V.  Ridgway,  153  N.  Y.  130;  see  also  Sayre  v.  Leonard,  57 
Colo.  116;  McFarland  v.  Sikes,  54  Conn.  250;  Benton  v.  Martin,  52  N.  Y. 
570;  Chapin  v.  Dobson,  78  N.  Y.  74;  Reynolds  v.  Robinson,  110  N.  Y.  654; 
Burke  v.  Dulaney,  153  U.  S.  228;  Hodge  v.  Smith,  130  Wis.  326;  Cavanagh 
V.  Beer  Co.,  113  N.  W.  (la.)  856;  Hilsdale  v.  Thomas,  40  Wis.  661;  Juilliard 
v.  Chafee,  92  N.  Y.  529;  Revere  Bank  v.  Morse,  163  Mass.  383;  Vosburg 
v  Diefendorf,  119  N.  Y.  357;  Citizens  Bank  v.  Millet,  103  Ky.  1. 

This  section  does  not  require  that  the  contract  of  conditional  delivery 
shall  be  in  writing. 

Norman  v.  McCarthy,  56  Colo.  290. 

A  note  founded  upon  a  good  consideration,  which  remains  in  the 
hands  of  the  payee  until  the  death  of  the  maker,  is  valid,  although  it  was 
received  and  held  by  the  payee  on  condition  that  it  should  be  returned 
whenever  the  maker  might  request. 

Warth  V.  Case,  42  N.  Y.  362. 

Where  the  maker  of  a  note  delivers  it  to  the  payee  with  the  under- 
standing that  it  shall  be  inoperative  until  the  happening  of  a  certain  event 
or  the  performance  of  a  certain  condition,  which  event  or  condition  has  not 
occurred  or  been  performed,  an  action  cannot  be  maintained  thereon. 

McKnight  v.  Parsons,  113  N.  W.  (la.)  858;  Central  Bank  v.  O'Connor, 
94  N.  W.  (Mich.)  11;  Larson  v.  Seguin,  149  N.  W.  174. 

It  is  necessary,  in  order  to  render  a  delivery  conditional,  that  express 
words  to  that  effect  be  used  at  the  time.  The  conclusion  may  be  drawn 
from  all  the  circumstances  which  properly  form  a  part  of  the  entire  trans- 
action, whether  in  point  of  time  they  precede  or  accompany  the  delivery. 

Wilson  V.  Powers,  131  Mass.  539. 

A  note  delivered  on  condition  that  it  shall  be  ineffective  unless  signed 
by  another  as  co-maker  cannot  be  enforced  by  the  payee  unless  so  signed. 

State  Bank  v.  Kelly,  152  N.  W.  125. 

Evidence  to  vary  the  terms  of  an  agreement  in  writing  is  not  admis- 
sible, but  evidence  to  show  that  there  is  not  an  agreement  at  all  is  ad- 
missible. A  promissory  note,  like  any  other  written  instrument,  has  no 
legal  inception  or  valid  existence  until  it  has  been  delivered  in  accordance 


52  NEGOTIABLE   INSTRUMENTS   LAW 

with  the  ptirpose  and  intention  of  the  parties,  and  in  support  of  a  plea 
denjdng  its  execution  it  is  competent  to  show,  as  between  the  parties  to 
it  or  others  having  notice,  that  the  manual  delivery  of  the  instnmient  to 
the  payee  was  accompanied  b}^  a  condition  which  was  never  fulfilled. 

Hunter  v.  Bank,  172  Ind.  62;  Bank  v.  O'Connor,  132  Mich.  578; 
Burke  v.  Dulaney,  153  U.  S.  228;  Bank  v.  Borman,  124  111.  200. 

It  is  competent  for  the  defendant  to  show  that  the  note  never  had  a 
valid  inception  and  that  the  delivery  was  conditional. 

Smith  V.  Dotterwich,  200  N.  Y.  299;  33  L.  R.  A.  892;  Rubel  v.  Honig, 
164  N.  Y.  Supp.  219. 

As  between  the  original  parties  to  a  promissory  note  and  others  having 
notice,  a  conditional  deliver}^  may  be  shown,  and  parol  evidence  that  the 
delivery  was  conditional  and  of  the  terms  of  the  condition  is  not  open  to 
the  objection  of  var^nng  or  contradicting  the  written  instnmient. 

Higgins  V.  Ridgway,  153  N.  Y.  130;  Bookstaver  v.  Jayne,  60  N.  Y. 
146;  Persons  v.  Hawkins,  41  App.  Div.  (N.  Y.)  171 ;  Simmons  v.  Thompson, 
29  App.  Div.  (N.  Y.)  559. 

Testimon}'  as  to  oral  conversations  contemporaneous  with  the  making 
and  delivery  of  a  note  representing  a  loan,  that  the  money  would  not  be 
demanded  back  until  a  certain  event  happened,  was  admissible  only  if 
tending  to  prove  that  the  deliver}^  of  the  note  itself  was  made  upon  con- 
dition that  it  should  not  be  complete  until  the  event;  i.  e.,  it  was  intro- 
duced, not  to  vary  or  to  show  that  there  was  no  agreement  until  the  event 
happened. 

Weinhandler  v.  Loewenthal,  159  Supp.  695. 

The  manual  transfer  of  an  instrument,  in  form  a  complete  contract, 
does  not  bar  parol  evidence  that  it  is  not  to  become  binding  until  the 
happening  of  some  condition  precedent  resting  in  parol,  or  that  the  trans- 
fer is  for  a  special  purpose. 

Reynolds  v.  Robinson,  110  N.  Y.  654;  Higgins  v.  Ridgway,  153  N.  Y. 
130;  Burke  v.  Dulaney,  153  U.  S.  228;  Niblock  v.  Sprague,  200  N.  Y.  390. 

It  is  a  question  of  fact  whether  any  written  agreement,  though  in 
possession  of  the  obligee,  has  been  delivered  by  the  obligor  as  a  binding 
agreement,  or  whether  any  delivery  that  has  been  made  is  conditional  only. 

Elastic  Tip  Co.  v.  Graham,  185  Mass.  597 ;  Benton  v.  Martin,  52  N.  Y. 
570;  Eastman  v.  Shaw,  65  N.  Y.  522;  Bookstaver  v.  Jayne,  60  N.  Y.  146; 
Grierson  v.  Mason,  60  N.  Y.  394;  Megowan  v.  Peterson,  173  N.  Y.  1; 
Juilliard  v.  Chaffee,  92  N.  Y.  529. 

Act  and  intention  are  the  essential  constituents  of  a  delivery  which 
makes  the  instrument  operative  according  to  its  terms.  The  final  question 
is,  did  the  obligor  do  such  act  in  reference  to  it  as  evidences  an  intention  to 
give  it,  in  the  possession  or  control  of  the  obligee,  effect  and  operation 


FORM    AND    INTERPRETATION  53 

according  to  its  terms.  Whenever  there  has  been  a  delivery  of  the  instru- 
ment for  the  purpose  of  giving  it  such  effect,  it  becomes  a  present  and 
completed  contract,  and  parol  evidence  cannot  be  given  to  contradict, 
vary  or  modify  its  terms. 

Jamestown  Business  College  Assn.  v.  Allen  172  N.  Y.  291;  Wooley  v. 
Cobb,  165  Mass.  503;  Currier  v.  Hale,  8  Allen  47;  Tower  v.  Richardson, 
6  Allen  351;  Brown  v.  Wiley,  20  How.  (U.  S.)  442;  Thomas  v.  Scutt,  127 
N.  Y.  133. 

Bills  and  notes  may  be  delivered  to  take  effect,  not  at  all  events,  but 
conditionally  upon  the  happening  of  a  future  contingency,  and  this  may  be 
accom.plished,  either  by  a  formal  delivery  in  escrow  into  the  hands  of  a 
third  person  for  the  promise,  or  by  delivery  to  the  promisee  himself  in  the 
natiire  of  an  escrow;  the  intervention  of  a  third  person  not  being  abso- 
lutely necessary. 

Gamble  v.  Riley,  39  Okla.  368;  Horton  v.  Birdsong,  129  Pac.  701; 
Lyons  v.  StHls,  37  S.  W.  (Tenn.)  280;  4  Am.  and  Eng.  Ency.  Law,  204- 
McNight  V.  Parsons,  113  N.  W.  (la.)  858. 

Delivery  by  mistake.  Where  a  note  was  given  by  mistake  as  to  the 
party  receiving  it,  and  was  accepted  by  such  party  fraudulently,  with 
knowledge  of  the  maker's  mistake,  the  note  is  void  from  its  inception. 

Bergmann  v.  Salmon,  79  Hun.  456,  affirmed  in  150  N.  Y.  575. 


Testimony  as  to  oral  conversations,  contemporaneous  with  the  making 
and  delivery  of  a  note  representing  a  loan,  that  the  money  would  not  be 
demanded  back  until  a  certain  event  happened,  was  admissible  only  if 
tending  to  prove  that  the  delivery  of  the  note  itself  was  made  upon  con- 
dition that  it  should  not  be  complete  until  the  event;  i.  e.,  if  it  was  intro- 
duced, not  to  vary  or  explain  defendant's  agreement,  but  to  show  that  there 
was  no  agreement  imtil  the  event  happened. 

Weinhandler  v.  Loewenthal,  159  N.  Y.  Supp.  695;  Smith  v.  Dotter- 
weich,  200  N.  Y.  299,  33  L.  R.  A.  892. 

In  an  action  by  the  payee  upon  a  promissory  note,  the  maker  was 
properly  permitted  to  show  a  contemporaneous  oral  agreement  pursuant 
to  which  the  note  was  delivered  conditionally  and  for  a  special  purpose 
only,  and  was  not  to  be  paid  unless  the  amount  thereof  was  collected  by 
the  maker  in  a  certain  suit  to  foreclose  a  mechanic's  lien.  Such  evidence 
did  not  vary  or  contradict  the  written  contract. 

Harder  v.  Reinhardt,  162  Wis.  558;  Hodge  v.  Smith,  110  N.  W.  192; 
Paulson  V.  Boyd,  118  N.  W.  841. 

The  words  "immediate  parties"  refer  to  those  who  are  "immediate" 
in  the  sense  of  knowing  or  being  held  to  know  of  the  conditions  or  limita- 


54  NEGOTIABLE    INSTRUMENTS   LAW 

tions  placed  upon  the  delivery  of  the  instrument.     A  payee  who  is  a  holder 
in  due  course  is  not  an  immediate  party  in  the  sense  of  this  section. 
National  Security  Co.  v.  Corey,  222  Mass.  455, 


Holder  in  due  course.  See  Sec.  91;  Linick  v.  Nutting  Co.,  140  App. 
Div.  N.  Y.  268. 

Delivered  checks  revoked  upon  drawer's  death.  A  check  is  revoked 
by  the  drawer's  death. 

Simmons  v.  Society,  31  Ohio  St.  457;  Tate  v.  Hilbert,  2  Vesey,  Jr., 
(Eng.)  Ill;  Second  National  Bank  v.  Williams,  13  Mich.  282. 

A  bank  is  protected  in  paying  a  check  in  ignorance  of  the  drawer's 
death. 

Drum  V.Benton,  13  App.  Cases  (D.  C.)  245;  Weiand's  Admr.  v.  State 
Nat.  Bank,  112  Ky.  310,  65  S.  W.  Rep.  617 ;  Brennan  v.  Merchants'  &  Mfrs. 
Nat.  Bank,  62  Mich.  343,  28  N.  W.  Rep.  881. 

The  death  of  the  drawer  of  a  check  before  its  payment  or  certification 
revokes  the  bank's  authority  to  pay  it,  but  the  bank  is  protected  in  paying 
the  check  in  ignorance  of  the  drawer's  death. 

In  re  Stacey's  Estate,  152  N.  Y.  Supp.  717;  Brennan  v.  Merchants' 
&  Manufacturers'  Nat.  Bank,  62  Mich.  343,  28  N.  W.  Rep.  881. 

A  bank  which  pays  a  check  with  knowledge  of  the  drawer's  death  is 
liable  for  the  amount  to  his  estate. 

Pullen  V.  Placer  County  Bank,  138  Cal.  169,  71  Pac.  Rep.  83. 

Where  a  check  delivered  to  the  payee  without  consideration  is  col- 
lected by  the  payee  after  the  drawer's  death,  the  money  so  received  remains 
the  property  of  the  estate  of  the  drawer. 

In  re  Stacy's  Estate,  152  N.  Y.  Supp.  717. 

Where  the  payee  of  a  check  collects  it  after  the  death  of  the  drawer, 
he  must  refund  the  amount  to  the  drawer's  estate. 

In  re  Adamson's  Will,  154,  N.  Y.  Supp.  667. 

Massachusetts  Rule. — There  is  a  statute  in  Massachusetts  relating 
to  savings  banks  and  institutions  for  savings  (Chapter  590,  Acts  of  1908), 
Section  65  of  which  provides: 

"Such  corporation  may  pay  an  order,  drawn  by  a  person  who  has 
funds  on  deposit  to  meet  the  same,  notwithstanding  the  death  of  the 
drawer,  if  presentation  is  made  within  thirty  days  after  the  date  of  such 
order;  and  at  any  time  if  the  corporation  has  not  received  written  notice 
of  the  death  of  the  drawer." 

The  above,  however,  would  not  apply  to  a  national  bank  so  as  to 
authorize  payment  of  a  customer's  check  after  his  death  where  the  officials 
had  knowledge  thereof. 


FORM   AND   INTERPRETATION"  55 

There  seems  to  be  some  diversity  of  authority  in  the  various  states  as 
to  whether  the  payee  of  a  negotiable  instrument  can  ever  be  a  "holder  in 
due  course"  within  the  meaning  of  the  statute.  See  Boston  Steel  &  Iron 
Co.  V.  Steuer,  183  Mass.  140,  66  N.  E.  646,  97  Am.  St.  Rep.  426;  Liberty 
Trust  Co.  V.  Tilton,  217  Mass.  462,  105  N.  E.  605,  L.  R.  A.  1915B,  144, 
which  hold  that  a  payee  is  not  necessarily  a  remote  party,  and  may  be  a 
holder  in  due  course.  See,  also,  Vander  Ploeg  v.  Van  Zuuk,  135  Iowa 
350,  112  N.  W.  807,  13  L.  R.  A.  (N.S).  490,  124  Am.  St.  Rep.  275;  Long 
V.  Shafer,  185  Mo.  App.  641,  171  S.  W.  690,  which  hold  that  a  payee  is  an 
immediate  party,  and  cannot  be  a  holder  in  due  course,  and  does  not  take 
free  from  any  defenses  which  the  maker  could  interpose  if  the  instrument 
were  non-negotiable. 

§  36.  Construction    where    instrument    is    ambiguous. 

Where  the  language  of  the  instrument  is  ambiguous,  or  there 
are  omissions  therein,  the  following  rtiles  of  construction  apply: 

1 .  Where  the  sum  payable  is  expressed  in  words  and  also 
in  figures  and  there  is  a  discrepancy  between  the  two,  the  sum 
denoted  by  the  words  is  the  sum  payable;  but  if  the  words 
are  ambiguous  or  uncertain,  references  may  be  had  to  the 
figures  to  fix  the  amount : 

2.  Where  the  instrument  provides  for  the  payment  of 
interest,  without  specifying  the  date  from  which  interest  is 
to  run,  the  interest  runs  from  the  date  of  the  instrument,  and 
if  the  instrument  is  undated,  from  the  issue  thereof; 

3.  Where  the  instrtunent  is  not  dated,  it  will  be  considered 
to  be  dated  as  of  the  time  it  was  issued ; 

4.  Where  there  is  a  conflict  between  the  written  and 
printed  provisions  of  the  instrument,  the  written  provisions 
prevail ; 

5.  Where  the  instrument  is  so  ambiguous  that  there  is 
doubt  whether  it  is  a  bill  or  note,  the  holder  may  treat  it  as 
either  at  his  election ; 

6.  Where  a  signature  is  so  placed  upon  the  instrument 
that  it  is  not  clear  in  what  capacity  the  person  making  the 
same  intended  to  sign,  he  is  to  be  deemed  an  indorser; 

7.  Where  an  instrument  containing  the  words  "I  promise 
to  pay"  is  signed  by  two  or  more  persons,  they  are  deemed 
to  be  jointly  and  severally  liable  thereon. 


56 


NEGOTIABLE    INSTRUMENTS    LAW 


Variant. — The  North  Carolina  statute  omits  subdivision  2.  The 
Wisconsin  statute  adds  a  new  subdivision  as  follows: — "8.  When  several 
waitings  are  executed  at  or  about  the  same  time,  as  parts  of  the  same 
transaction,  intended  to  accomplish  the  same  object,  they  may  be  con- 
strued as  one  and  the  same  instrument  as  to  all  parties  having  notice 
thereof." 


Subd.  I . — The  figures  in  the  margin  of  an  instrument  are  no  material 
part  of  it  and  are  used  as  convenience. 

Norwich  Bank  v.  Hude,  13  Conn.  281;  Schreyer  v.  Hawkes,  22  Ohio 
St.  308;  Prim  v.  Hammel,  134  Ala.  652;  Kimball  v.  Costa,  76  Vt.  289; 
Witty  V.  Michigan  Mut.  Life  Ins.  Co.,  123  Ind.  411. 

The  theory  of  inserting  the  figures  in  addition  to  the  written  amount 
in  the  body  of  the  instrument  is  that  the  amount  might  strike  the  eye 
immediately. 

Gerard  v.  Lewis,  L.  R.  10  Q.  B.  Div.  30. 

Marginal  figures  in  a  note  may  be  referred  to  for  the  purpose  of  sup- 
plying the  amoimt  for  which  the  note  was  given,  when  such  amount  has 
been  wholly  omitted  in  the  body  of  the  note. 

Kimball  v.  Costa,  76  Vt.  289. 


LomsviLLE.KY..  ^^/y,i^/,, J91^ 


OR  ORDER 


s^ 


'o 


.Dollars 


{INDORSED) 

PAY  TO  W.  S.  GOODWIN 

JOHN   BROWN,  WARDEN 

W.  S.  GOODWIN 

From  the  face  of  the  check  it  is  not  plain  whether  the  amount  intended 
is  S20.00  or  $70.00.  Providing  the  indorsements  were  correct  the  paying  teller 
would  be  justified  in  papng  the  lesser  amoiint.     As  to  the  indorsement, 


FORM    AND    INTERPRETATION  57 

"John  Brown,  Warden,"  it  is  incorrect,  as  such  indorsement  is  not  the 
indorsement  of  St.  Paul's  Church,  and  would  be  a  personal  indorsement  of 
John  Brown — the  word  "Warden"  being  merely  descriptive.  If,  however, 
John  Brown  was  authorized  to  indorse  the  paper  of  St.  Paul's  Church,  and 
was  in  the  custom  of  indorsing  as  above,  such  authority  should  be  in  the 
hands  of  the  paying  bank  before  the  amount  be  paid.  The  indorsement  of 
W.  S.  Goodwin  being  in  blank  would  make  the  check  payable  to  bearer 
in  case  the  previous  indorsement  had  been  correct. 


UfiJTii  Smt  isTiisi  Qqmp^w  -  ^ 

<^y^j,  . M,^^^  ..^^^^  ^ -^Ci^Zy   *^j.^ Dollars 


{INDORSED) 

PAY  TO  UNION  TRUST  CO., 

ANNA  B.  DUNN 

UNION  TRUST  CO. 

The  amoimt  of  the  check  as  evidenced  by  the  writing  and  figures  is 
misleading.  The  check  should  be  paid  for  the  amount  in  writing,  for 
which  amount  the  maker  is  liable — the  figures  being  a  mere  memorandum. 
Regarding  the  indorsement,  "Anna  B.  Dimn,"  if  she  is  known  to  be  the 
same  person  as  Mrs.  A.  S.  Dunn  mentioned  as  payee,  the  indorsement 
shoiild  be  accepted.  If,  however,  the  paying  bank  has  no  such  knowledge, 
the  check  should  be  returned  to  the  Union  Trust  Company  for  the  irregular- 
ity. However,  the  paying  bank  may  rely  upon  the  right  of  recovirse 
against  the  Union  Trust  Company,  the  last  indorser.  It  is  a  custom,  how- 
ever, to  enable  previous  indorsers  to  protect  themselves  to  draw  attention 
to  such  irregularities. 

Subd.  2. — ^Where  a  note  provided  for  the  payment  of  interest  and  no 
rate  being  mentioned  it  will  draw  interest  at  the  legal  rate  of  the  place 
where  dated. 

Franklin  Bank  v.  Roberts,  168  N.  C.  473;  Homstein  v.  Cifunio,  86 
Neb.  103. 


58 


NEGOTIABLE    INSTRUMENTS    LAW 

Interest  Laws  of  All  the  States. 


States  and  Territories. 


Alabama 

Alaska 

Arizona 

Arkansas 

California 

Colorado 

Connecticut 

Delaware 

District  of  Columbia. 

Florida 

Georgia 

Hawaiian  Islands . .  .  . 

Idaho 

Illinois 

Indiana 

Iowa 

Kansas 

Kentucky 

Louisiana 

Maine 

Maryland 

Massachusetts 

Michigan 

Minnesota 

Mississippi 

Missouri 

Montana 

Nebraska 

Nevada 

New  Hampshire 

New  Jersey 

New  Mexico 

New  York 

North  Carolina 

North  Dakota 

Ohio 

Oklahoma 

Oregon 

Pennsylvania 

Philippine  Islands — 

Porto  Rico 

Rhode  Island 

South  Carolina 

South  Dakota 

Tennessee 

Texas 

Utah 

Vermont 

Virginia 

Washington 

West  Virginia 

Wisconsin 

Wyoming. 


DAYS  OF  GRACE 

RATES 

OF  INTEREST. 

STATUTES 

OF    LIMITATIONS. 

Sight 

Legal. 

SPECIAL    OR 

Judgments 

Notes. 

Open  Accis 

Drafts 

CONTRACT 

Years. 

Years. 

Years. 

No 

No 

8 

8  per  ^  t. 

20 

6* 

3 

No 

No 

8 

12  per  ct. 

10 

6 

6 

No 

No 

6 

10  per  ct. 

5 

4 

3 

No 

No 

6 

10  per  ct. 

10 

5 

3 

No 

No 

7 

No  limit 

5 

4 

4 

No 

No 

8 

No  Hmit 

20 

6 

6 

No 

No 

6 

1112  per  ct. 

(a) 

(b) 

6 

No 

No 

6 

6  per  ct. 

10 

('t 

3 

No 

No 

6 

10  per  ct. 

12 

3 

3 

No 

No 

8 

10  per  ct. 

20 

5 

3 

No 

No 

7 

8  per  ct. 

7 

6t 

6 

No 

No 

8 

12  per  ct. 

20 

6 

6 

No 

No 

7 

12  per  ct. 

6 

5 

4 

No 

No 

5 

7  per  ct. 

20 

10 

5 

No 

No 

6 

8  per  ct. 

20 

10 

6 

No 

No 

6 

8  per  ct. 

20t 

10 

5 

No 

No 

6 

10  per  ct. 

5 

5 

3 

No 

No 

6 

6  per  ct. 

15 

15 

2 

No 

No 

5 

8  per  ct. 

10 

5 

3 

No 

Yes 

6 

No  limit. 

20 

6-20 

6 

No 

No 

6 

6  per  ct. 

12 

3 

3 

No 

Yes 

6 

No  limit. 

20 

6 

6 

No 

No 

5 

7  per  ct. 

6 

6 

6 

No 

No 

6 

10  per  ct. 

10 

6 

6 

No 

No 

6 

8  per  ct. 

7 

6 

3 

No 

No 

6 

8  per  ct. 

10 

10 

5 

No 

No 

8 

No  limit. 

10 

8 

5 

No 

No 

7 

10  per  ct. 

5 

5 

2 

No 

No 

7 

No  limit. 

6 

6 

4 

No 

Yes 

6 

6  per  ct. 

20 

6 

6 

No 

No 

6 

6  per  ct. 

20 

6 

6 

No 

No 

6 

12  per  ct. 

7 

6 

4 

No 

No 

6 

1(6  per  ct. 

20 

6 

6 

No 

No 

6 

6  per  ct. 

10 

3* 

3 

No 

No 

6 

10  per  ct. 

10 

6 

6 

No 

No 

6 

8  per  ct. 

5 

15 

6 

No 

No 

6 

10  per  ct. 

1-5 

5 

3 

No 

No 

6 

10  per  ct. 

10 

6 

6 

No 

No 

6 

6  per  ct. 

5 

6t 

6 

No 

No 

6 

No  imit. 

No 

No 

6 

12  per  ct. 

5 

3 

3 

No 

Yes 

6 

No  limit . 

20 

6 

6 

No 

No 

7 

8  per  ct. 

10 

6 

6 

No 

No 

7 

12  per  ct. 

20 

6 

6 

No 

No 

6 

6  per  ct. 

10 

6 

3 

Yes 

Yes 

6 

10  per  ct. 

10 

4 

2 

No 

No 

8 

12  per  ct. 

8 

6 

4 

No 

No 

6 

6  per  ct. 

8 

6 

6 

No 

No 

6 

6  per  ct. 

20 

5* 

5 

No 

No 

6 

12  per  ct. 

6 

6 

3 

No 

No 

6 

6  per  ct. 

10 

10 

5 

No 

No 

6 

10  per  ct. 

6-20 

6 

6 

No 

No 

8 

12  per  ct. 

21 

10 

8 

II  Any  rate  of  interest  on  call  loans  of  $5,000  or  upward,  on  collateral  security, 
(a)  No  limit,     (b)  Negotiable  notes,  6  years.     *  Under  seal,  10  years. 
fUnder  seal,  20  years.     |  In  Courts  of  Record,  20  years;  Justice's  Court,  10  years. 
i  Over  6  per  cent,  cannot  be  collected  by  law. 


FORM    AND    INTERPEETATION  59 

Interest,  conflict  of  laws.  A  contract  valid  where  made  is  valid 
everywhere.  Thus  a  resident  of  one  state  may  authorize  an  agent  in 
another  state  where  there  is  no  limit  upon  the  rate  of  interest  to  execute  a 
note  in  his  name  in  that  state  and  the  note  so  made  is  a  valid  obligation, 
although,  if  executed  in  his  own  state  would  be  void  for  usury. 

Thompson  v.  Erie  R.  R.  Co.,  147  App.  Div.  8;  207  N.  Y.  171;  see  also 
Western  Co.  v.  Kilderhous,  87  N.  Y.  430;  Whitehead  v.  Heidenheimer, 
57  App.  Div.  590. 

Where  a  resident  of  Illinois  sent  to  a  resident  of  New  York  a  ten  per 
cent,  note  in  payment  of  a  debt  due  the  latter,  it  was  held  that  the  usurious 
character  of  the  note  was  to  be  determined  by  the  laws  of  the  State  of 
Illinois,  though  it  was  payable  in  New  York, 

Sheldon  v.  Hoxtun,  91  N.  Y.  124;  Agricultural  Bank  v.  Sheffield,  4 
Hun.  421. 

But  a  note  made  in  New  York  State  and  payable  there,  specifying 
no  rate  of  interest,  no  intention  existing  that  it  will  be  discounted  elsewhere, 
is  controlled  by  the  laws  of  that  state,  and  if  first  discounted  in  another 
state  at  a  rate  of  interest  lawful  there,  but  illegal  in  New  York,  it  may  be 
invalid  for  usury. 

Dickinson  v.  Edwards,  77  N.  Y.  573;  Clayes  v.  Hooker,  4  Hun.  231. 

Where  a  note  is  sent  to  one  state  for  negotiation  and  had  its  inception 
in  that  state,  the  fact  that  it  was  signed  in  another  state  does  not  require 
that  the  laws  of  the  latter  state  shall  govern  the  rate  of  interest  thereon. 

Smith  V.  Dixon,  150  App.  Div.  (N.  Y.)  571 ;  Wayne  Co.  Bank  v.  Low, 
81  N.  Y.  566. 

A  note  which  is  dated  and  payable  in  Florida  is  regarded  as  a  Florida 
contract  so  far  as  the  defense  of  usiiry  is  concerned,  though  it  is  made  and 
executed  in  New  York. 

Cutler  V.  Wright,  22  N.  Y.  472. 

Subd.  3. — As  to  authority  to  fill  in  date,  see  notes  to  Sec.  33. 

It  is  well  settled  that  a  note  payable  on  demand  and  a  note  payable 
on  demand  after  date  are,  for  the  purpose  of  the  running  of  the  Statute  of 
Limitations,  deemed  due  and  payable  respectively  on  the  day  of  the  date 
of  the  note  and  the  day  following  without  demand. 

Hardon  v.  Dixon,  77  App.  Div.  (N.  Y.)  241;  Van  Vliet  v.  Kanter, 
139  App.  Div.  604. 

See  notes  under  Subdivision  1,  Sec.  25  and  Sec.  33. 

Subd.  4. — This  is  a  general  proposition  applicable  to  all  written 
contracts. 


60  NEGOTIABLE   INSTKUMENTS    LAW 

In  a  case  of  conflict  the  court  will  consider  the  whole  instrument,  and 
not  one  or  more  parts  detached  from  the  others. 

Barkley  v.  Ellis,  45  N.  Y.  107. 

Where  two  clauses  apparently  repugnant  may  be  reconciled  by  any 
reasonable  construction,  as  by  regarding  one  as  qualification  of  the  other, 
that  construction  must  be  given  because  it  cannot  be  assumed  that  the 
parties  intended  to  insert  inconsistent  provisions. 

Miller  V.  Hannibal  &  St.  Jo.  R.  R.,  90  N.  Y.  433. 

Subd.  5. — See  Heise  v.  Bumpass,  40  Ark.  547;  Dan.  Neg.  Int.  Sec.  131. 

Subd.  6. — A  note  reading  "Four  months  after  date  the  Northwestern 
Straw  Works  promise  to  pay,"  etc.,  was  signed 

"The  Northwestern  Straw  Works" 

"E.   R.   Stillman,   Treas." 

"John  W.  Mariner." 

While  the  note  was  ambiguous  as  to  Mariner,  parol  evidence  was 
admissible  to  show  that  he  signed  in  a  representative  capacity,  even  as 
against  a  bona  fide  purchaser  of  the  note  before  its  maturity. 

Germania  Bank  v.  Mariner,  129  Wis.  544;  see  Sec.  114;  Germania 
Nat.  Bank  v.  Mariner,  129  Wis.  544. 

Subd.  7. — See  Uelery  v.  Brohm,  20  Colo.  App.  544;  Kingsley  v. 
Sampson,  100  111.  54. 

§  37.  Liability  of  person  signing  in  trade  or  assumed 

name.  No  person  is  liable  on  the  instrument  whose  sig- 
nature does  not  appear  thereon,  except  as  herein  otherwise 
expressly  provided.  But  one  who  signs  in  a  trade  or  assumed 
name  will  be  liable  to  the  same  extent  as  if  he  had  signed  in 
his  own  name. 

Variant. — The  Wyoming  statute  omits  the  word  "expressly." 


In  an  action  on  a  promissory  note  which  was  made  payable  to  the 
National  Publishing  Company,  a  company  which  had  no  legal  existence 
but  was  an  assumed  name  used  by  the  payee,  he  was  estopped  from  alleging 
it  was  made  payable  to  a  fictitious  payee. 

Jones  V.  Home  Furnishing  Co.,  9  App.  Div.  (N.  Y.)  103. 

A  person  may  become  a  party  to  a  bill  or  note  by  any  mark  or  designa- 
tion which  he  choses  to  adopt  as  a  substitute  for  his  name,  and  where  the 


FORM    AND    INTERPRETATION  61 

word  "agent"  is  added  to  his  name  he,  and  not  the  undisclosed  principal, 
is  liable  thereon. 

Stackpole  v.  Arnold,  11  Mass.  27;  Manufacturers  &  Traders  Bank  v. 
Love,  13  App.  Div.  (N.  Y.)  561;  Dan.  Neg.  Int.  Sec.  304. 

A  person  who  sells  commercial  paper  as  his  own  is  understood  to 
warrant  his  title  thereto  to  be  good — and  that  the  instrument  is  good.  A 
co-partnership  may  exist  and  the  parties  to  it  be  bound  even  though 
there  is  no  finn  name,  if  such  name  has  been  agreed  upon — a  name  that 
fairly  represents  the  company  m.ay  be  adopted,  and  by  custom  and  use 
becomes  its  valid  name. 

M.  N.  Bank  v.  Gallaudet,  120  N.  Y.  298. 

§  38.  Signature  by  agent;  authority;  how  shown.     The 

signature  of  any  party  may  be  made  by  a  duly  authorized 
agent.  No  particular  form  of  appointment  is  necessary  for 
this  purpose;  and  the  authority  of  the  agent  may  be  estab- 
lished as  in  other  cases  of  agency. 

Variant. — In  the  Kentucky  statute  the  words  "an  agent  duly  author- 
ized in  writing"  are  substituted  for  the  words  "duly  authorized  agent"  in 
the  first  sentence. 

On  the  effect  of  the  change,  see  Finley  v.  Smith,  165  Ky.  445. 


"It  is  an  acknowledged  principle  of  the  law  of  agency  that  a  general 
power  of  authority  given  to  an  agent  to  do  an  act  in  behalf  of  the  principal 
does  not  extend  to  a  case  where  it  appears  that  the  agent  himself  is  the 
person  interested  on  the  other  side." 

Bank  of  N.  Y.  v.  A.  D.  &  T.  Co.,  143  N.  Y.  559. 

"There  is  no  reason  which  is  founded  on  principle  that  can  be  given 
for  not  applying  the  same  rule  of  agency  to  a  cashier  as  to  other  persons 
occupying  fiduciary  relations.  No  person  can  act  as  an  agent  in  a  trans- 
action in  which  he  has  an  interest,  or  to  which  he  is  a  party,  on  the  side 
opposite  to  his  principal.  This  must  be  so  where  the  person  dealing  with 
the  agent  has  knowledge  of  the  facts.  A  person  cannot  deal  with  a  cashier 
of  a  bank  as  an  individual,  in  securing  a  draft  and  claim;  after  the  draft 
is  delivered  it  has  become  the  transaction  of  the  bank.  To  make  the  acts 
of  the  cashier  valid,  the  transaction  in  which  the  draft  is  delivered  must 
be  a  bank  transaction,  made  by  the  cashier,  within  his  express  or  implied 
authority  in  the  conduct  of  the  business  of  the  bank.  So  long  as  a  person 
deals  with  the  cashier  in  a  n-jatter  wherein,  as  between  himself  and  the 
cashier,  he  is  dealing  with,  or  has  a  right  to  believe  he  is  dealing  with,  the 
bank,  the  transaction  is  obligatory  upon  the  bank.     The  cashier  is  pre- 


62  NEGOTIABLE   IISTSTRUMENTS   LAW 

sumed  to  have  all  the  authority  he  exercises  in  dealing  \vith  executive  func- 
tions legally  \\'ithin  the  powers  of  the  bank  itself,  or  which  are  usually  or 
customarily  done,  or  held  out  to  be  done,  by  such  an  ofRcer.  But  the  test 
of  the  transaction  is  whether  it  is  with  the  bank  and  its  business,  or  with 
the  cashier  personally  and  in  his  business." 

Claflin  V.  Bank,  25  N.  Y.  293;  Moores  v.  Bank,  111  U.  S.  164. 

A  married  woman  stands  at  law  on  the  same  footing  as  if  unmarried, 
and  therefore  may  authorize  her  husband  as  agent  to  make  for  her  nego- 
tiable paper. 

Noll  V.  Kinney,  106  N.  Y.  74. 

Authority  of  corporation  officers  to  make  notes. 


^Z-^on 


y?/  Ci^tX,<i^  ^.ojr .   Ca3: 


In  the  foregoing  illustration,  if  Cochran  was  not  authorized  by  a  resolu- 
tion of  the  board  of  directors  it  could  not  be  considered  a  corporation 
obligation.  While  the  treasurer  of  a  corporation  is  its  fiscal  officer,  and 
prima  facie,  checks,  drafts  and  notes  issued  in  the  business  of  the  corpora- 
tion, signed  by  him  as  such  officer,  are  the  obligations  of  the  corporation, 
for  they  are  acts  which  such  an  officer  would  ordinarily  perform. 

In  Miners  &  Merchants  Bank  v.  Ardsley  Co.,  113  App.  Div.  199  the 
court  said: — 

"The  evidence  was  clearly  insufficient  to  justify  or  sustain  a  finding 
that  the  defendant  held  its  treasurer  out  as  authorized  to  make  promis- 
sory notes,  or  its  president  to  negotiate  notes  so  made,  or  that  it  ratified 
the  acts  of  the  treasurer  in  issuing  or  of  the  president  in  negotiating  this 
note.  There  was  no  course  of  dealing  or  holding  out  these  officers  as 
authorized  by  which  the  defendant  could  be  held  liable  on  the  theory  of 
implied  authority,  or  on  the  theory  of  estoppel.  It  is  doubtful  whether  the 
by-laws  conferred  authority  on  the  treasurer  to  issue  promissory  notes  of 
the  company,  even  when  coimtersigned  by  the  president,  with  action  of 
the  board  of  directors;  but  that  point  need  not  be  decided  for  it  is  quite 
clear  that,  in  any  event,  it  only  authorized  the  issuance  of  its  promissory 
notes  when  signed  by  the  treasurer  and  countersigned  by  the  president. 


FORM    AND    INTERPRETATION  63 

There  seems  to  be  a  distinction  between  actions  on  promissory  notes  of 
business  and  religious  corporations  with  respect  to  what  evidence  is  suf- 
ficient to  estabHsh  a  prima  facie  case  that  the  paper  was  issued  by  author- 
ity of  the  defendant.  (People's  Bank  v.  St.  Anthony's  R.  C.  Church,  109 
N.  Y.  512;  Karsch  v.  Pottier  &  Stymus  Mfg.,  etc.,  Co.,  82  App.  Div.  230.) 
The  weight  of  authority,  however,  is  to  the  effect  that  a  recovery  cannot 
be  had  against  either  a  religious  or  a  business  corporation  on  commercial 
paper  imless  the  evidence  taken  as  a  whole  shows  or  warrants  a  finding 
not  only  that  the  paper  was  issued  by  officers  of  the  corporation,  but  that 
its  issuance  was  authorized  by  the  by-laws,  or  by  a  resolution  of  the  board 
of  directors,  or  by  a  course  of  dealing  by  which  the  corporation  held  them 
out  as  authorized  to  issue  it,  and  would  be  deemed  estopped  from  question- 
ing their  authority  or  of  ratification  by  the  acceptance  and  retention  of 
some  benefit  or  advantage  from  the  unauthorized  act  or  otherwise. 
(Dabney  v.  Stevens,  2  Sweeney,  415,  425;  affd.  on  this  point,  46  N.  Y.  681; 
People's  Bank  v.  St.  Anthony's  R.  C.  Church,  supra;  Bangs  v.  National 
Macaroni  Co.,  15  App.  Div.  522;  National  Bank  of  Newport  v.  Snyder 
Mfg.  Co.,  107  id.  95;  National  Bank  v.  Navassa  Phosphate  Co.,  56  Hun. 
136;  McCullough  v.  Moss,  5  Den.  567;  Greene  v.  Iroquois  Hotel  &  Apart- 
ment Co.,  84  N.  Y.  Supp.  591;  Davis  Sewing  Machine  Co.  v.  Best,  105 
N.  Y.  59).  Proof  of  such  authority  in  the  case  of  a  corporation  is  what  is 
shown  in  the  case  of  an  individual  or  co-partnership  by  proof  of  the  genuine- 
ness of  the  signature.  The  rule  is  deemed  essential  to  protect  corporations 
against  the  unauthorized  and  fraudulent  acts  of  its  officers;  and  those 
taking  negotiable  paper  purporting  to  be  the  paper  of  a  corporation  must 
ascertainat  their  peril,  if  they  take  it  relying  upon  the  credit  of  the  maker, 
whether  it  was  authorized.  (De  Bost  v.  Albert  Palmer  Co.,  35  Hun,  386; 
Cheever  v.  Pittsburgh,  etc.,  R.  R.  Co.,  150  N.  Y.  59,  65.)" 

Persons  dealing  with  negotiable  instruments  are  presumed  to  take 
them  on  the  credit  of  the  parties  whose  names  appear  upon  them;  and  a 
person  not  a  party  cannot  be  charged  upon  proof  that  the  ostensible  party 
signed  or  indorsed  as  his  agent. 

Eastern  R.  R.  Co.  v.  Benedict,  5  Gray,  566.  See  also,  Stackpole  v. 
Arnold,  11  Mass.  27;  Sumwalt  v.  Rigely,  20  Md.  107;  Briggs  v.  Partridge, 
64  N.  Y.  363;  Manufacturers  &  Traders  Bank  v.  Love,  13  App.  Div.  564. 

Where  a  negotiable  promissory  note  given  for  the  debt  of  a  corporation, 
the  language  does  not  disclose  the  corporate  obligation,  and  the  signatures  to 
it  are  in  the  names  of  individuals  who  were  officers  of  the  corporation,  a 
bona  fide  holder  without  notice  of  the  circumstances  of  its  making,  is 
entitled  to  hold  it  as  the  personal  undertaking  of  its  signers,  although  they 
have  affixed  to  their  names  the  title  of  their  respective  offices.  Such  title 
will  be  regarded  as  descriptive  of  the  persons. 


64  NEGOTIABLE    INSTRUMENTS    LAW 

C.  N.  Bank  v.  Clark,  139  N.  Y.  307;  First  Nat.  ^Bank  of  Brooklyn, 
84  Hun.  376;  Bush  v.  Gilmore,  45  App.  Div.  (N.  Y.)  89. 

Powers  of  officers  to  bind  a  corporation. 


^•^A— '^^S^tfgM-^^   «   .  ^^    <W^      ^'C^^i 


Proof  that  a  promissory  note  purporting  to  be  made  by  a  religious 
corporation  was  signed  by  its  president  and  treasurer,  does  not  show  that 
it  is  the  note  of  the  corporation,  without  proof  that  it  was  made  by  its 
authority.  An  agency  can  neither  be  created  nor  proved  by  the  acts  or 
declarations  of  the  assimied  agent  alone.  In  an  action  against  a  corpora- 
tion, the  presumption  that  its  officers  have  done  their  duty  does  not  stand 
for  proof  of  authority,  in  a  matter  outside  of  their  official  duties,  and  where 
special  authority  must  have  been  confessed  to  justify  the  act.  In  the 
above  illustration  imless  Mackey  and  Moon  had  authority  from  the  board 
or  authority  under  the  articles  of  incorporation,  or  by  the  by-laws  of  the 
corporation,  their  act  would  not  bind  the  corporation.  They  have  no 
separate  authority  to  bind  it,  even  though  assented  to  by  a  majority  with 
authority,  acting  singly  outside  of  a  corporate  meeting.  A  person  taking 
the  paper  of  a  corporation  is  bound  to  inquire  as  to  the  power  of  the  officers 
executing  the  same  to  contract. 

Columbia  Bank  v.  Gospel  Church,  127  N.  Y.  361;  People's  Bank  v. 
St.  Anthony's  Church,  109  N.  Y.  512. 


FOEM    AND    INTEEPRETATION  65 


_^j>,^^yy:^yJ^^/  \(^^2.^<2,^  ^(^^  y^^^^2.<2y: 


{INDORSED) 
ED.  HOGABOOM. 

The  general  authority  of  a  president  of  a  business  corporation  to  make 
and  discount  notes  gives  him  no  power  to  make  a  note  of  the  corporation 
payable  to  his  own  order,  and  one  who  discounts  such  a  note  cannot  recover 
thereon  against  the  corporation  without  showing  special  authority  for  its 
execution.  An  act  done  or  a  contract  made  with  himself  by  an  agent  on 
behalf  of  his  principal  is  presumed  to  be,  and  is  notice  of  the  fact  that  it  is 
without  the  scope  of  his  general  powers.  The  form  of  the  foregoing  note 
carries  notice  to  the  purchaser  of  a  possible  want  of  power  and  sufficient 
to  put  him  on  guard.  There  is  another  reason  why  this  note  is  not  binding 
on  the  hotel  corporation.  It  is  that  it  was  an  accommodation  note,  that 
the  bank  had  notice  of  that  fact  when  it  discounted  the  paper,  and  that  it 
was  beyond  the  powers  of  the  corporation  to  make  a  note  of  that  character. 

Park  Hotel  Co.  v.  Foiirth  Nat.  Bank,  86  Fed.  742;  Bank  v.  Armstrong, 
152  U.  S.  346;  Claflin  v.  Bank,  25  N.  Y.  293;  Bank  v.  Wagner,  20  S.  W. 
(Ky.)  535;  Smith  v.  Association,  78  Cal.  289;  20  Pac.677;  Nat.  Park  Bank 
V.  G.A.M.Co.,  116  N.  Y.  281;  Aetna  Bank  v.  Charter  Oak  Co.,  50  Conn. 
167;  Nat.  Bank  v.  Globe  Works,  101  Mass.  57;  Davis  v.  R.  R.  Co.,  131 
Mass.  258;  Lucas  v.  Transfer  Co.,  70  Iowa  541;  Bank  v.  Kennedy,  167 
U.  S.  362. 

As  to  religious  or  other  corporations,  not  engaged  in  business,  a  busi- 
ness act  which  charges  them  with  liability  must  have  been  shown  to  have 
been  authorized  before  the  liability  will  attach. 

People's  Bank  v.  St.  Anthony's  Church,  109  N.  Y.  512. 

When  an  agent  abandons  the  object  of  his  agency  and  acts  for  himself 
by  committing  a  fraud  for  his  own  exclusive  benefit,  he  ceases  to  act  within 
the  scope  of  his  employment  and  to  that  extent  ceases  to  act  as  agent. 

Shipman  v.  Bank  of  New  York,  126  N.  Y.  318,  331,  27  N.  E.  371, 
12  L.R.A.791,  22  Am.  St.  Rep.  821;  Welsh  v.  German-American  Bank,  73 


66  NEGOTIABLE   INSTRUMENTS   LAW 

N.  Y.  424,  29  Am.  Rep.  175;  Allen  v.  South  Boston  R.  Co.,  150  Mass.  200, 
206,  22  N.  E.  917,  5  L.  R.  A.  716,  15  Am.  St.  Rep.  185. 

While  it  is  well  settled  that  a  principal  is  responsible  for  the  frauds 
of  his  agent  while  acting  wnthin  the  scope  of  his  authority,  it  is  equally 
well  settled  that  the  principal  is  not  responsible  for  the  fraudulent  acts  of 
his  agent  committed  outside  the  scope  of  his  authority  and  for  his  own 
personal  advantage. 

Taylor  v.  Commercial  Bank,  174  N.  Y.  181,  66  N.  E.  726,  62  L.  R.  A. 
783,  95  Am.  St.  Rep.  564;  Henry  v.  Allen,  151  N.  Y.  1,  11,  45  N.  E.  355, 
36  L.  R.  A.  685;  Cushman  v.  Amend,  103  N.  Y.  Supp.  45. 

The  authorities  very  generally  hold  that  an  agent  with  general  author- 
ity to  manage  the  business  of  his  principal  has  not,  by  reason  thereof, 
implied  power  to  indorse  or  execute  negotiable  paper. 

1  Am.  &  Eng.  Ency.  of  Law,  1030;  Jackson  Co.  v.  Commercial 
Bank,  199  111.  151,  65  N.  E.  136;  Pluto  Powder  Co.  v.  Cuba  Bank,  153 
Wis.  324;  Deering  Co.  v.  Kelso,  74  Minn.  41,  76  N.  W.  792. 

The  authority  of  an  agent  to  a  particular  act  in  connection  with  a 
transaction  may  be  inferred  from  proof  that  his  principal  authorized  or 
ratified  similar  acts  in  connection  with  past  transactions. 

Cartage  Co.  v.  Cox,  74  Ohio  St.  284;  Antrim  v.  Anderson,  140  Mich. 
702;  Union  Stock  Yards  v.  Mallory,  157  111.  554. 
As  to  proof  of  authority  of  agent  see: 

In  re  Estate  of  Chismore,  166  la.  217;  Scotland  National  Bank  v. 
Hohn  (Mo.)  125  S.  W.  539;  Eldredge  v.  Husted,  22  Misc.  534;  Grant 
County  Bank  v.  N.  W.  Land  Co.,  28  N.  D.  479. 

The  extent  to  which  a  principal  shall  authorize  his  agent  is  completely 
within  his  determination,  and  a  party  dealing  with  the  agent  must  ascer- 
tain the  scope  and  reach  of  the  powers  delegated  to  him,  and  must  abide 
by  the  consequences  if  he  transcends  them.  A  power  of  attorney,  like 
any  other  contract,  is  to  be  construed  according  to  the  natural  meaning 
of  the  words  in  view  of  the  purpose  of  the  agency  and  the  needs  to  its 
fulfillment.  The  authority  within  it  under  such  construction  is  not  to  be 
broadened  or  extended. 

Porges  V.  U.  S.  M.  &  Trust  Co.  203  N.  Y.  181. 

The  purpose  of  a  written  power  of  attorney  is  not  to  define  the  author- 
ity of  the  agent,  as  between  himself  and  his  principal,  but  to  evidence 
the  authority  of  the  agent  to  third  parties  with  whom  the  agent  deals. 

Keyes  v.  Metropolitan  Trust  Co.,  220  N.  Y.  237;  Watson  v.  Cleveland, 
21  Conn.  538 ;  Wimberly  v.  Windham,  104  Ala  .409 ;  Fitzbaugh  v.  Spunangle, 
118  la.  341;  Hallady  v.  Underwood,  90  111.  App.  130. 


FORM    AND   INTEEPBETATION  67 


POWER     OF     ATTORNEY 

KNOW  ALL  MEN  BY  THESE  PRESENTS,  that  I, 

of  ,   have    made,   constituted    and  ap- 
pointed, and  by  these  presents  do  make,  constitute  and  appoint 

of   true    and    lawful    attorney  for 

and  in  name,  place  and  stead: 

I.   To  draw  checks  against account  in  the 

Bank. 


2.  To  endorse  notes,  checks,  drafts  or  bills  of  exchange  which  may 
require  endorsement  for  deposit  or  for  collection  in  said  bank. 

J.  To  borrow  money  from  the  said  bank  and  to  execute,  seal  and  deliver 
any  notes,  bonds  or  other  instruments  in  writing  necessary  therefor,  and  to 
assign  as  collateral  security  stocks,  bonds,  warehouse  receipts  or  other  personal 
property. 

4.  To  endorse  any  paper  may  offer  said  bank  for  discount. 

5.  To  draw  and  accept  all  drafts  or  bills  of  exchange. 

6.  To  waive  demand,  protest  and  notice  of  protest  on  all  notes,  checks 
drafts  or  bills  of  exchange. 

7.  To  do  all  lawful  acts  requisite  for  effecting  these  premises,  hereby 
ratifying  and  confirming  all  that  the  said  attorney  shall  do  therein  by  virtue 
of  these  presents. 

It  is  understood  and  agreed  that  this  power  shall  stand  irrevoked  and  in 

full  force  until  notice  thereof  shall  be  given,  in  writing,  by  

or  legal  representatives  to  said  Bank. 

In  witness  whereof, have  hereunto  set  hand  and 

seal  this day  of ,  in  the  year  of  our  Lord  one  thousand 

nine  hundred  and  

{Seal) 

Signed,  sealed  and  delivered  in  the  presence  of 


68  NEGOTIABLE   INSTRUMENTS    LAW 

REVOCATION  OF  POWER  OF  ATTORNEY 
To  the Bank, 


Dear  Sirs: 

Please  take  notice  that  the  undersigned  hereby  revokes  a  certain  power  of 

attorney  heretofore  made  and  executed  on  the day  of    

ip ,  wherein  and  whereby  one  of 

was  made,  constituted  and  appointed  due  and  proper 

attorney  to  perform  certain  acts  therein  more  particularly  described,  holding 
you  harmless  from  all  acts  which  may  have  been  heretofore  done  by  you  pur- 
suant to  the  said  power  of  attorney  and  previous  to  the  receipt  of  this  notice  of 
revocation. 
Dated  the day  of ig 


§  39.  Liability  of  person  signing  as  agent.  Where  the 
instrument  contains  or  a  person  adds  to  his  signature  words 
indicating  that  he  signs  for  or  on  behalf  of  a  principal,  or  in  a 
representative  capacity,  he  is  not  liable  on  the  instrument  if 
he  was  duly  authorized;  but  the  mere  addition  of  words 
describing  him  as  an  agent,  or  as  filling  a  representative  char- 
acter, without  disclosing  his  principal,  does  not  exempt  him 
from  personal  liability. 

Variant. — The  Virginia  Statute  adds  the  words:  "without  disclosing 
his  principal"  after  the  word  "capacity." 


A  promissory  note  signed  "Annie  M.  PhilHps,  Admrx."  constitutes 
an  individual  obHgation  of  the  said  Annie  M.  Phillips,  the  word  "Admrx." 
being  simply  descriptive. 

Jenkins  v.  Philhps,  41  App.  Div.  (N.  Y.)  389. 

The  same  nile  applies  to  notes  signed  "guardian,"  "trustee,"  "secre- 
tary," etc. 

Bank  v.  Looney,  99  Tenn.  278;  Schmittler  v.  Simon,  114  N.  Y.  186; 
Daniel  v.  Glidden,  38  Wash.  556. 

An  agent,  who  on  behalf  of  his  principal,  purchases  property 
and  delivers  to  the  vendor  in  pajnnent  thereof  a  promissory  note  signed 
with  his  own  name  to  which  he  added  the  word  "Agt."  is  not  personally 
liable,  where  it  appears  that  the  vendor  accepted  the  note,  with  knowledge 


FOKM    AND   INTEKPKETATION  69 

that  the  agent  was  not  acting  in  his  individual  capacity  but  as  agent  for 
another. 

Crandall  v.  Rollins,  83  App.  Div.  (N.  Y.)  618;  Sumwalt  v.  Rigley,  20 
Md.  107. 

When  one  knowingly  and  without  dissent  permits  another  to  act  as 
his  agent,  the  capacity  will  be  conclusively  presiimed. 

Joyce  V.  Rohan,  111  N.  W.  (la.)  319. 

If  an  agent  signs  a  note  with  his  own  name  alone  and  there  is  nothing 
on  its  face  to  show  that  he  is  acting  as  agent,  he  is,  and  his  principal  is  not, 
personally  liable. 

Burkhalter  v.  Perry,  127  Ga.  438;  N.  Y.  Life  Ins.  Co.  v.  Martindale, 
88  Pac.  (Kan.)  559;  121  Am.  St.  Rep.  362. 

Where  the  bank  discounting  note  as  above  had  knowledge  of  the  inten- 
tion of  the  signers,  see  First  National  Bank  v.  Wallis,  150  N.  Y.  458; 
Second  Nat.  Bank  v.  Midland,  155  Ind.  581.  A  trustee  of  an  insolvent 
firm,  for  the  benefit  of  the  creditors  thereof,  appointed  by  such  firm  and  its 
creditors,  is  not  personally  liable  under  this  section,  upon  a  note  signed  by 
him  as  "Trustee." 

Mogowan  v.  Peterson,  173  N.  Y.  1.  See  also,  Kerby  v.  Ruegamer, 
107  App.  Div.  (N.  Y.)  491;  Jump  v.  Sparling,  218  Mass.  344;  Meyers  v. 
Chesley,  177  S.  W.  Rep.  326. 

An  owner  contracted  for  the  erection  of  certain  buildings.  During 
the  work  the  premises  were  conveyed  to  trustees  for  creditors,  for  the  pur- 
pose of  completing  the  buildings.  A  sub-contractor,  with  knowledge  of 
the  facts,  agreed  with  the  trustees  to  do  certain  work  on  the  buildings,  and 
received  a  note  therefor,  signed  by  the  trustees  in  their  individual  names, 
followed  by  the  words  "as  trustees,  etc."  There  was  evidence  that,  when 
the  note  was  given,  the  sub-contractor  was  informed  that  the  trustees 
would  not  incur  personal  liability.  Held,  that  the  trustees  were  not  bound 
individually,  though  the  note  did  not  on  its  face  disclose  that  its  considera- 
tion was  for  the  benefit  of  the  creditors  of  the  owner,  and  that  it  was  given 
by  the  trustees  as  trustees  for  the  creditors. 

Kerby  v.  Ruegamer  et  al.,  95  N.  Y.  Supp.  408;  Nat.  Bank  v.  Wallace, 
150  N.  Y.  455;  Megowan  v.  Peterson,  173  N.  Y.  1;  Kirby  v.  Ruegamer, 
107  App.  Div.  491.     For  exception  to  the  rule  see  Sec.  72. 

Where  the  name  of  a  religious  corporation  indorsed  upon  its  promis- 
sory note  is  followed  by  the  names  of  its  president  and  treasurer,  the  words 
"finance  committee"  and  the  names  of  the  persons  constituting  such 
committee,  the  indorsement  comes  within  the  protection  of  this  section, 
and  negatives  any  personal  liability  on  the  part  of  the  individual  signers. 

Cheslee  Ex.  Bank  v.  First  U.  P.  Church,  89  Misc. 


70  NEGOTIABLE    INSTRUMENTS   LAW 


Qj,U^^;^£^Z/-^€^^.c^^v^y^y     V  jA^^ ^^^ 


^£  -^yJ^y^j^^/  (S^^.^Aa^ly  y^/^^X 


3^\AS>^     S!oU^>.^JL.    CL-^    %SL^n.) 


(IXDORSEMENT) 

FIRST  UNITED  PRESBYTERIAN  CHURCH 
JOHN  ELLIOTT,  PRES. 
EDWARD  A.  SHEA,  TREAS. 
JOHN  ELLIOTT,        \ 
EDWARD  A.  SHEA,  Finance  Committee. 
JOHN  McKEE,  J 

In  an  action  against  John  Elliott,  Edward  A.  Shea  and  John  McKee 
as  indorsers,  held  that  the  note  was  complete  and  unambiguous  in  form, 
and  nowhere  does  it  import  more  than  a  corporate  obligation  and  no  per- 
sonal liability  attached. 

Chelsea  Ex.  Bank  v.  First  U.  P.  Church,  89  Misc.  619;  see  also  Falk 
V.  Moebs,  127  U.  S.  597;  Carpenter  v.  Farnsworth,  106  Mass.  561 ;  Libscher 
V.  Kraus,  74  Wis.  387;  Farmers  &  Mechanics  Bank  v.  Colby,  64  Cal.  352; 
Atkins  V.  Brown,  59  Maine  90;  Castle  v.  Belfast,  72  Maine  167;  Lathan  v. 
Houston  Mills,  3  S.  W.  (Tex.)  462;  Hitchcock  v.  Buchanan,  105  U.  S.  416; 
Collins  V.  Buckeye  Ins.  Co.,  17  Ohio  St.  215. 

Where  a  person  signs  a  promissory  note  adding  the  word  "agent" 
after  his  name,  and  there  is  nothing  on  the  face  of  the  instrument  to  show 
that  he  does  not  intend  to  be  bound  thereby,  he  is  personally  liable,  the 
word  "agent"  being  merely  descriptive  of  the  person  so  signing. 

Casco  Bank  v.  Clark,  139  N.  Y.  307;  Burkhalter  v.  Perry,  127  Ga. 
438;  Tradesmen  Bank  v.  Looney,  99  Tenn.  278. 


FORM    AND    INTERPRETATION  71 

Liability  of  a  person  signing  as  trustee. 


ja.3  \S^.,^^AY.<^y.'^M.  Air/  J^.f,  ^9<^^ 


y^X^^i^X^  -^J.Q/:^^^^^n^ 


^p^  :d^c^^^^_^  ^yj^^^^.   TJAxiXi/  ^^^ao 


W/^- 


X^^./'^C?.>..^ 


\lA./\^^^^i^  £t. 


Stevens  Company  upon  the  trial  introduced  the  note  in  question  in 
evidence,  the  signature  being  admitted  and  then  rested.  The  defendant 
showed  that  prior  to  the  making  of  the  note  Peterson  called  a  meeting  of 
his  creditors  and  at  such  meeting  the  creditors,  among  which  were  Stevens 
Company,  assembled  executed  a  paper,  appointed  Peterson  as  sole  agent 
and  trustee  for  the  benefit  of  all  creditors. 

Under  these  facts  the  court  held  that  Peterson  was  acting  as  trustee 
for  the  creditors  and  no  personal  liability  attached. 

The  signature  in  which  the  name  of  the  principal  followed  by  the  word 

"by"  or  "per" agent,  is  regarded  as  the  proper  method  of 

disclosing  the  agency,  and  imposes  no  personal  liability  on  the  person  so 
signing  as  agent.  A  note  in  the  following  form  is  the  contract  of  Harry 
A.  Sampson  and  not  John  Lockwood. 


In  order  to  reheve  an  agent  from  liability  upon  an  instrument,  executed 
by  him  within  the  scope  of  his  authority  and  agency,  he  must  not  only 
name  his  principal  but  must  express  by  some  form  of  words  that  the 
liability  is  that  of  the  principal  though  done  through  the  agent.  A  mere 
description  of  the  general  relation  of  office  with  the  person  signing  the 


72 


NEGOTIABLE    INSTRUMENTS   LAW 


paper  bears  to  another  person,  mthout  indicating  that  the  particular 
signature  is  made  in  the  execution  of  the  agency,  is  not  sufficient  to  charge 
the  principal  or  exempt  the  agent  from  personal  liability. 

Petz  V.  Stanton,  10  Wend.  271 ;  Guthrie  v.  Imbrie,  6  Pac.  661 ;  53  Am. 
Rep.  331;  Kansas  Nat.  Bank  v.  Day,  62  Kan.  692;  Shoe  &  Leather  Bank 
V.  Dix,  123  Mass.  148;  Means  v.  Stormwood,  32  Ind.  87. 


Mjf'//>r^/rf./y^      ^^-^^/y  r^^f^..^P^ 


(£ y^j2^ 


'^y^.^a^y^ 


'7>^...CAY>^    ^yr^.^f^.<::/.^7y^y.';>-Z^^ 


m 


'/ao 


^ 


w^ 


This  note  only  binds  the  ostensible  maker,  though  the  word  "agent" 
is  attached  to  his  signature,  no  principal  being  named  in  the  body  of  the 
instrument,  or  indicated  by  the  signattire.  A  party  is  not  bound  to  search 
for  a  principal  unknown  to  the  instrument  itself.  The  rights  of  the  holder 
are  confined  to  the  parties  to  the  instrument,  and  he  must  rely  upon  them 
alone,  except  he  can  establish  that  the  name  used  as  the  signature  to  the 
instrument  has  been  adopted  by  the  assimied  principal  or  by  the  person 
not  named  in  the  instnmient  as  his  own  in  transacting  the  business. 

Manufacturers  &  Traders  Bank  v.  Love,  13  App.  Div.  (N.  Y.)  564; 
Casco  Bank  v.  Clark,  139  N.  Y.  307. 


X>rCOn  ^ 


0^^^24=^ 


.(^.n^ 


'.^^ 


'^&^i4J 


'^^^•-"^••^rr^tf.      <1 


But  in  the  foregoing  case  the  descriptive  words  following  the  signature 
of  the  makers  suggest  the  possibility  that  the  Hobart  Horse  and  Cattle 
Show  Association  might  have  intended  thereby  to  make  the  promise,  and 


FORM    AND    INTERPRETATION 


73 


as  the  action  was  between  the  original  parties  to  the  note,  it  was  competent 
for  the  defendants  to  show  that  there  was  a  corporation  by  that  name; 
that  the  makers  were  president  and  secretary;  that  the  corporation  had  the 
benefit  of  the  consideration;  that  the  makers  were  authorized  to  make 
the  note  as  the  act  of  the  corporation,  and  intended  to  do  so,  and  that 
plaintiff's  testator  at  the  time  he  received  the  note  knew  these  facts  and 
took  the  note  with  the  understanding  that  the  corporation  was  its  maker. 
Such  evidence  would  not  contradict  the  note,  but  would  give  further  and 
permissible  meaning  to  the  addendxim  to  the  signatures  of  the  makers,  and 
tend  to  show  that  such  addendum  was  made  as  the  corporate  execution 
of  the  note,  and  was  understood  by  both  parties  to  it. 

Bush  V.  Gilmore,  45  App.  Div.  89;  Bank  of  Genesee  v.  Patchin,  19 
N.  Y.  312;  Groves  v.  Acker,  85  Hun.  492;  Schmittler  v.  Simon,  114  N.  Y. 
176,  186. 


'Wizwrd  Licctiic  &  Mfg.  Compi 


//f/^^^^  -r^/ZzyzJy  Y  -4/X:z^fU<n^  Q;^,^^^ 


.^.><g^>g^^2^. 


/^vlj 


Where  a  negotiable  promissory  note,  given  for  the  debt  of  a  corpora- 
tion, the  language  of  the  promise  does  not  disclose  the  corporate  obliga- 
tion, and  the  signatures  to  it  are  in  the  names  of  the  individuals,  who  were 
in  fact  officers  of  the  corporation,  a  bona  fide  holder,  without  notice  of  the 
circumstances  of  its  making,  is  entitled  to  hold  it  as  the  personal  under- 
taking of  its  signers,  although  they  have  affixed  to  their  names  the  title 
of  their  respective  offices,  this  will  be  regarded  as  descriptive  of  the  persons 
and  not  of  the  character  of  liability.  This  is  the  rule  even  though  the 
corporation  name  is  printed  on  the  margin  of  the  note. 

C.  N.  Bank  v.  Clark,  139  N.  Y.  312;  Belmont  Dairy  Co.  v.  Thrasher, 
124  Md.  320;  Daniel  v.  GHdden,  38  Wash.  556;  Hayes  v.  Matthews,  63 
Ind.  412;  Burlingame  v.  Brewster,  79  111.  512. 

But  in  First  Nat.  Bank  v.  WalHs,  150  N.  Y.455,as  between  the  original 
parties,  it  was  held  that  if  the  bank,  when  it  discovmted  the  paper,  was 
informed  or  knew  that  the  note  was  issued  by  the  corporation,  and  was 
intended  to  create  a  corporate  liability,  it  could  not  be  enforced 
against  the  defendants  as  individuals,  who,  by  mistake  had  executed  it  in 


74  NEGOTIABLE   INSTRUMENTS   LAW 

such  fonn  as  to  make  it  on  its  face  their  own  note,  and  not  that  of  the 
corporation.  But  nothing  short  of  notice,  express  or  impHed,  brought 
home  to  the  bank  at  the  time  of  the  discount,  that  the  note  was  issued  as 
the  note  of  the  corporation,  and  was  not  intended  to  bind  the  defendants, 
could  defeat  its  remedy  against  the  parties  actually  liable  thereon  as 
promisors. 

See  also  Higgins  v.  Ridgway,  153  N.  Y.  130;  Baird  v.  Baird,  145  N.  Y. 
659,  664;  Schmitter  v.  Simon,  114  N.  Y.  176. 

Notes  of  a  corporation  signed  with  its  corporate  name  "by  Henry  0. 
Narstead,  President,  J.E.Schultz,"  the  latter  name  being  that  of  its  secre- 
tary, by  their  terms  impose  a  personal  liability  on  him. 

Exchange  Bank  v.  Schultz,  149  N.  W.  99. 

§  40.  Signature  by  procuration;  effect  of.  A  signature 
by  "procuration"  operates  as  notice  that  the  agent  has  but  a 
limited  authority  to  sign,  and  the  principal  is  bound  only  in 
case  the  agent  in  so  signing  acted  within  the  actual  limits  of 
his  authority. 

Variant.— The  Illinois  statute  omits  the  word  "only"  after  "bound." 


The  term  "procuration"  is  seldom  used  in  this  country,  but  is  fre- 
quently used  in  England;  this  section  being  taken  from  the  English  Bill  of 
Exchange  Act. 

Byles  on  Bills,  33;  Dan.  Neg.  Inst.,  Sec.  280. 

§  41.  Effect  of  indorsement  by  infant  or  corporation. 

The  indorsement  or  assignment  of  the  instrument  by  a  cor- 
poration or  by  an  infant  passes  the  property  therein,  not- 
withstanding that  from  want  of  capacity  the  corporation  or 
infant  may  incur  no  liability  thereon. 

Variant.— The  North  Carolina  statute  adds  the  words  "or  married 
woman"  after  the  word  "infant"  in  both  instances. 


The  defense  of  infancy  is  a  personal  one,  and  the  defense  ultra  vires 
on  the  part  of  the  corporation  being  intended  for  the  benefit  of  the  stock- 
holders cannot  be  taken  advantage  of  by  third  parties. 

As  to  the  transfer  of  negotiable  paper  by  infants,  see: 

Roach  V.  Woodhall,  91  Tenn.  206;  Dan.  Neg.  Inst.,  Sec.  682. 

As  to  transfer  by  corporations,  see: 


rOEM   AND    INTEEPEETATION  75 

Willard  v.  Crook,  21  App.  Div.  (N.  Y.)  237;  Hess  v.  Sloane,  66  App. 
Div.  (N.  Y.)  522;  North  Hudson  v.  Hudson  Bank,  11  L.  R.  A.  845;  People's 
Bank  v.  St.  Anthony's  Chiirch,  109  N.  Y.  512;  Notes  to  Sec.  55. 

A  treasurer  of  a  manufacturing  company  has  no  power  to  make  promis- 
sory notes  in  its  name  unless  such  power  is  expressly  given  to  such  officer 
by  the  by-laws  of  the  corporation  or  by  resolution  of  its  board  of  directors, 
and  one  who  deals  with  the  officers  or  agents  of  a  corporation  is  bound  to 
know  their  powers  and  the  extent  of  their  authority. 

Jacobus  V.  Jamestown  Mantel  Co.,  211  N.  Y.  161;  People's  Bank  v. 
St.  Anthony's  Church,  109  N.  Y.  525;  Westchester  Mtg.  Co.  v.  Mclntyre, 
157  N.  Y.  Supp.  726. 


C^Z^^(§fZ^^>^/ 


Squires,  Taylor  &  Co.,  the  m.akers  and  payees  of  said  note, indorsed 
it  in  blank  and  thereupon  it  was  indorsed,  "German  American  Warehousing 
Co.,  Robert  Squires,  President."  This  note  was  then  discounted  and  the 
avails  credited  to  Squires,  Taylor  &  Co.  The  fact  that  the  maker  of  a 
promissory  note  procures  it  to  be  discounted  for  his  own  benefit  is  imex- 
plained  notice  to  the  discounter  that  the  indorsement  is  not  in  the  usual 
course  of  business  but  it  is  for  the  accommodation  of  the  maker. 

National  Park  Bank  v.  German  American  Warehousing  Co.,  116 
N.  Y.  393;  Hendrie  v.  Berkowitz,  37  Cal.  113;  Bloom  v.  Helm,  53  Miss.  21; 
National  Bank  v.  Globe,  101  Mass.  57;  Davis  v.  Old  Colony  R.  R.  Co., 
131  Mass.  258;  Culver  v.  Reno  Co.,  91  Penn.  367. 

A  manufacturing  corporation  has  no  power  to  make  or  indorse  notes 
for  the  accommodation  of  others.  (National  Park  Bank  of  N.  Y.  v. 
Rural  Home  Co.,  90  Him.  365;  157  N.  Y.  684.)  One  who  deals  wath  the 
officers  or  agents  of  a  corporation  is  bound  to  know  their  powers  and  the 
extent  of  their  authority.  (Alexander  v.  Cauldwell,  83  N.  Y.  480.)  Not- 
withstanding the  general  rule  stated,  a  corporation  is  bound  if  it  makes 
or  indorses  commercial  paper  for  the  accommodation  of  another  in  respect 
to  a  bona  fide  holder  who  discounts  it  before  maturity  on  the  faith  of  its 
being  business   paper.     (Mechanics'   Banking  Association  v.  N.  Y.  &  S. 


76  NEGOTIABLE   INSTKUMENTS    LAW 

White  Lead  Co.,  35  N.  Y.  515.)  The  decision  in  the  White  Lead  Co.  case 
(supra)  and  other  similar  decisions  are  based  upon  the  assumption  that  the 
officers  making  or  indorsing  a  promissory  note  had  authority  from  the 
corporation  to  make  and  indorse  such  notes  in  the  ordinary  course  of  its 
business.  Such  decisions  do  not  apply  to  a  case  where  the  officers  purport- 
ing to  act  for  a  corporation  do  not  have  authority  to  sign  commercial 
paper  in  the  ordinary  cotirse  of  its  business.  A  treasurer  of  a  manufactur- 
ing corporation  has  no  power  to  make  promissory  notes  in  its  name  unless 
such  power  is  expressly  given  to  such  officers  by  the  by-laws  of  the  corpora- 
tion or  by  resolution  of  its  Board  of  Directors.  (Thompson  on  Corpora- 
tions (2d  ed.),  Sec.  1564;  Daniels  on  Negotiable  Instruments  (5th  ed.),  vol. 
1,  Sec.  394;  Edwards  on  Bills,  Sec.  65;  Beach  on  Private  Corporations  (2d 
ed.),  vol.  2,  Sec.  804;  National  Bank  of  Newport  v.  Snyder  Mfg.  Co.,  107 
App.  Div.  95;  Niagara  Falls  Suspension  Bridge  Co.  v.  Bachman,  66  N.  Y. 
261;  National  Bank  of  the  Repubhc  v.  Navassa  Phosphate  Co.,  56  Him. 
136;  People's  Bank  v.  St.  Anthony's  R.  C.  Church,  109  N.  Y.  512.) 

§  42.  Forged  signature;  effect  of.  Where  a  signature  is 
forged  or  made  without  authority  of  the  person  whose  sig- 
nature it  purports  to  be,  it  is  wholly  inoperative,  and  no  right 
to  retain  the  instrument,  or  to  give  a  discharge  therefor,  or 
to  enforce  payment  thereof  against  any  party  thereto,  can  be 
acquired  through  or  under  such  signature,  unless  the  party, 
against  whom  it  is  sought  to  enforce  such  right,  is  precluded 
from  setting  up  the  forgery  or  want  of  authority. 

Variant. — The  Illinois  statute  omits  the  words  "of  the  person  whose 
signatiu-e  it  purports  to  be." 


See  Section  326. 

Where  a  contract  is  evidenced  by  several  writings,  all  of  which  are 
material  to  show  the  actual  agreement  of  the  parties,  the  fraudulent  altera- 
tion of  any  of  them  by  one  of  the  parties  invalidates  all,  as  against  the  other. 

Meyer  v.  Hunckee,  55  N.  Y.  412. 

The  same  rule  wovdd  apply  on  alteration  of  any  material  part  of  a 
negotiable  instrument. 

First  National  Bank  v.  Allen,  100  Ala.  476;  De  Feriet  v.  Bank  of 
America,  23  la.  Ann.  310;  Darma  v.  National  Bank  of  the  Republic,  132 
Mass.  156;  Morgan  v.  U.  S.  Mortgage  Co.  208  N.  Y.  218;  Meyers  v.  S.  W. 
National  Bank,  193  Pa.  St.  1;  Weinstein  v.  National  Bank,  69  Texas  38; 
Leather  Manufacturers'  Bank  v.  Morgan,  117  U.  S.  96. 

The  agent  of  the  plaintiff  was  authorized  to  draw  checks  against 
plaintiff's  account  in  the  defendant  bank.  The  agent  drew  a  number  of 
checks,  payable  to  various  persons  with  whom  the  plaintiff  had  business 


FORM   AND   INTERPRETATION  77 

dealings.  The  agent  forged  the  indorsement  of  the  payees  on  these  checks 
and  procured  the  money  thereon  directly  from  the  bank,  or  by  negotiating 
them  to  others.  It  was  held  that  the  bank  was  not  liable  for  the  amount 
thus  wrongfully  secured  by  the  agent,  for  the  reason  that  the  bank  was 
misled  through  the  fault  of  the  plaintiff. 

Litchfield  Shuttle  Co.  v.  Cumberland  Valley  National  Bank,  183  S.  W. 
Rep.  1006. 

The  agent  of  the  plaintiff  had  power  of  attorney  to  receive  and  indorse 
checks  for  the  purpose  of  deposit  in  a  specified  bank.  He  received  such 
checks,  indorsed  them  with  the  name  of  the  payee,  adding  his  own  indorse- 
ment, and  transferred  them  to  a  broker  having  knowledge  of  such  agency. 
The  checks  were  thereafter  deposited  in  the  broker's  bank,  not  the  bank 
where  the  agent  was  authorized  to  make  deposits.  In  an  action  for  con- 
version held,  that  the  broker  having  knowledge  of  the  agency  would  have 
been  liable.  The  bank,  however,  was  not  liable,  having  no  knowledge  to 
impeach  the  checks  which  were  regular  on  their  face. 

Salen  v.  Bank  of  State  of  N.  Y.,  110  App.  Div.  (N.  Y.)  636. 

The  rule  as  laid  down  in  Salen  v.  Bank  of  State  of  N.  Y.  is  not  applic- 
able when  the  agent  has  authority  to  indorse  checks  for  the  purpose  of 
deposit  in  a  designated  bank,  and  which  checks  he  deposits  to  his  own 
accotmt  in  said  bank.  The  authority  to  indorse  and  deposit  to  the  princi- 
pal's account  does  not  authorize  a  deposit  to  his  own  account,  and  a  bank 
is  bound  to  make  inquiry  as  to  the  extent  of  his  authority. 

Schmidt  v.  Garfield  National  Bank,  64  Hun.  298;  Wilson  v.  Metro- 
politan R.  R.,  120  N.  Y.  145. 

Genesee  Valley  TRUST  Company 


{INDORSED) 

C.  A.  SCHMIDT  CO. 
GEORGE  LINGARD 

Christian  A.  Schmidt  Company  employed  one  Lingard,  authorizing 
him  to  indorse  checks  and  drafts  for  deposit,  and  fiunished  him  a  stamp 


78  NEGOTIABLE    INSTRUMENTS    LAW 

reading  "For  deposit  in  the  Chemical  National  Bank  to  the  credit  of 

,"  which  it  was  his  custom  to  use  in  indorsing  paper  for 

deposit  and  to  place  his  signature  under  this  indorsement.  Lingard  in- 
dorsed a  large  amount  of  paper,  "Christian  A.  Schmidt  Co. — George 
Lingard,"  not  using  the  stamp,  and  deposited  the  paper  to  his  own  credit 
in  his  own  bank,  from  which  he  afterwards  drew  out  the  proceeds  and 
converted  them  to  his  own  use.  In  an  action  brought  by  Schmidt  Co. 
against  his  bank  to  recover  the  amount  of  such  checks,  held — that  he  could 
recover.  The  check  was  drawn  payable  to  the  order  of  Schmidt  Co.  and 
when  deposited  by  Lingard  in  the  defendants'  bank  they  were  indorsed 
with  the  names  of  Schmidt  Co.  and  Lingard  in  Lingard's  handwriting. 
The  officers  of  the  bank,  therefore,  knew  that  Schmidt  Co.'s  name  had  not 
been  indorsed  upon  the  check  by  Schmidt  Co.,  but  had  been  indorsed  by 
Lingard.  In  receiving  the  checks  and  paying  the  proceeds  thereof  to 
Lingard  the  officers  of  the  bank  acted  at  their  peril ;  they  knew  that  Lingard 
had  indorsed  the  checks -^nth  plaintiff's  name,  and,  imless  they  were  satisfied 
to  take  the  risk  of  paying  the  proceeds  to  Lingard,  they  were  bound  to 
make  inquiry  as  to  the  extent  of  his  authority. 

Schmidt  Co.  v.  Garfield  National  Bank,  64  Hun.  p.  298,  affirmed  138 
N.  Y.,  63L 

Where  an  officer  or  agent  of  a  corporation  makes  a  corporate  obligation 
payable  to  himself,  it  bears  upon  its  face  sufficient  notice  of  his  incapacity 
to  issue  it,  when  he  attempts  to  deal  with  it  for  his  own  benefit. 

Hanover  Bank  v.  Am.  Dock  &  T.  Co.,  148  N.  Y.  612;  Bank  of  N.  Y. 
etc.  V.  Am.  Dock  &  T.  Co.,  143  N.  Y.  559. 

A  drawer  who  pays  money  on  forged  checks,  payable  to  bearer,  relying 
on  the  unqualified  indorsement  of  the  holder  presenting  them,  and  who 
has  been  in  the  habit  of  cashing  checks  of  the  drawer  whose  name  was 
forged,  may  recover  of  the  indorser,  when  the  mistake  of  the  drawer  has 
not  been  to  the  prejudice  of  the  indorser. 

Williamsburg  Trust  Co.,  v.  Tune,  120  App.  Div.  (N.  Y.)  518. 

A  bank  which  pays  a  check  drawn  on  it,  bearing  payee's  indorsement 
forged  by  an  employee  of  the  drawer,  is  liable  to  the  drawer  for  the 
amoimt  thus  paid. 

Metallurgical  Co.  v.  Mechanics  Bank,  157  Supp.  321. 

The  fact  that  one  signature  to  a  note  is  a  forgery  will  not  necessarily 
affect  the  liability  of  the  other  makers  concerning  the  genuineness  of  whose 
signature  there  is  no  question;  if  the  other  makers  signed  with  knowledge 
of  the  forgery,  they  cannot  avail  themselves  of  the  fraud,  but  the  rule 
would  be  different  in  case  of  innocent  makers. 


FORM    AND    INTERPRETATION  79 

Beem  v.  Farrell,  135  Iowa  670;  Geering  v.  Metropolitan  Bank,  170 
App.  Div.  (N.  Y.)  751. 

A  by  fraudulently  representing  himself  to  be  B,  obtained  a  check 
from  C  payable  to  the  order  of  B.  At  the  time  C  knew  of  the  existence 
of  B  and  delivered  the  check  to  A,  supposing  him  to  be  B.  A  indorsed 
B's  name  on  the  check  and  gave  it  to  D,  who  collected  from  the  bank. 
In  an  action  to  recover  from  the  bank  the  court  said:  "It  is  a  fundamental 
rule  that  when  a  bank  received  money  to  be  checked  out  by  a  depositor,  it 
is  to  be  checked  out  only  as  the  depositor  shall  order.  If  therefore,  it  pays 
out  money  othervnse  than  according  to  such  order,  it  is  liable  to  the 
depositor  for  the  amotmt  so  paid."  Hence,  if  it  pays  money  out  on  a 
forged  signature,  the  depositor  being  free  from  blame  or  negligence,  it  must 
bear  the  loss. 

First  National  Bank  v.  American  Exch.  National  Bank,  170  N.  Y.  88; 
Tolman  v.  American  Bank,  22  R.  I.  463;  U.  S.  Portland  Cement  Co.  v.  U.  S. 
National  Bank  (Or)  157  Pac.  Rep.  202;  Armstrong  v.  National  Bank,  46 
Ohio  St.  512,  22  N.  E.  866;  German  Savings  Bank  v.  Citizens'  Bank,  101 
Iowa  530;  Robertson  v.  Coleman,  141  Mass.  231. 

This  same  rule  applies  to  "travelers'  checks." 

Sullivan  v.  Knauth,  161  App.  Div.  (N.  Y.)  148;  Somberg  v.  Am. 
Express  Co.,  136  Mich.  639. 

If  the  bill  run  to  a  fictitious  payee  it  is  as  if  drawn  to  bearer,  and 
indorsement  is  not  necessary.  But  if  it  be  payable  to  some  person  known 
at  the  time  to  exist  and  present  to  the  mind  of  the  drawer  when  he  made  it 
as  the  party  to  whose  order  it  was  to  be  paid,  the  genuine  indorsement  of 
such  payee  is  necessary. 

Rogers  v.  Ware,  2  Neb.  29;  Rowe  v.  Putnam,  131  Mass.  281. 

Where  a  transaction  is  contrary  to  good  faith  and  the  fraud  affects 
individual  interests  only,  ratification  is  allowed,  but  where  the  fraud  is  of 
such  a  character  as  to  involve  a  crime  the  adjustment  of  which  is  forbidden 
by  public  policy,  the  ratification  of  the  act  from  which  it  springs  up  is  not 
permitted. 

Christian,  etc.  v.  Walton,  181  Pa.  St.  201. 

But  in  Massachusetts  one  ratifying  a  signature  on  a  promissory  note 
purporting  to  be  his  and  which  he  knows  to  be  forged  is  bound  by  it. 

Central  National  Bank  v.  Copp,  184  Mass.  328;  Traders'  National 
Bank  v.  Rogers,  167  Mass.  315. 

Authority  to  an  agent  to  indorse  checks  in  a  specifically  restricted 
manner,  in  order  that  they  may  be  deposited  to  the  account  of  the  principal, 
does  not  confer  upon  the  agent  authority  to  indorse  for  any  other  purpose. 

Schmidt  v.  Garfield  National  Bank,  64  Hun.  298,  affirmed  138  N.  Y. 
631.     Standard  S.  S.  Co.  v.  Com  Exchange  Bank,  84  Misc.  447. 


80  NEGOTIABLE    INSTRUMENTS    LAW 

Liability  of  savings  banks. — A  savings  bank  which  pays  a  deposit  on 
a  series  of  forged  drafts,  presented  by  one  in  possession  of  the  pass  book, 
is  not  liable  unless  it  is  negligent  in  failing  to  detect  the  forgery.  It  is 
negligent  only  where  the  discrepancy  between  the  genuine  and  forged 
signatures  is  so  plain  that  an  ordinary  competent  clerk,  exercising  reason- 
able care,  should  detect  the  forgery. 

Noah  V.  Bank  for  Savings  of  N.  Y.  157  Supp.  324;  171  App.  Div.  191; 
Campbell  v.  Schenectady  Savings  Bank,  114  App.  Div.  (N.  Y.)  337; 
Kelley  v.  Buffalo  Savings  Bank,  180  N.  Y.  171,  69  L.  R.  A.  317;  Appleby 
V.  Erie  Co.  Savings  Bank,  62  N.  Y.  12;  Robestein  v.  Franklin  Savings 
Bank,  152  N.  Y.  Supp.  277;  Krummel  v.  Germania  Savings  Bank,  127 
N.  Y.  488. 

A  savings  bank,  which  pays  a  deposit  to  a  person  wrongfully  in  pos- 
session of  the  pass  book,  is  responsible  for  the  amount  to  the  real  owner 
of  the  deposit,  where  the  difference  between  the  genuine  signature  of  the 
depositor  and  the  forged  signature,  on  which  the  pajnnent  was  made, 
was  "such  as  to  be  apparent  to  a  man  experienced  in  comparing  hand- 
writing." The  bank  is  not  protected  in  a  case  of  this  kind  by  a  by-law 
to  the  effect  that  a  payment  made  to  a  person  presenting  a  deposit  book 
shall  be  deemed  to  be  made  to  the  depositor. 

Schneider  v.  Union  Dime  Savings  Bank,  156  N.  Y.  Supp.  753. 

Signature  on  corporate  check. — A  bank  is  liable  in  paying  the  check 
of  a  corporation,  the  signature  on  which  does  not  conform  to  the  signature 
on  file  at  the  bank. 

Shoe  Lasting  Machine  Co.  v.  Western  National  Bank,  79  N.  Y. 
App.  Div.  588,  75  N.  Y.  Supp.  627. 

Where  a  person  having  possession  of  checks  forged  the  name  of  the 
payee  and  then  indorsed  them  himself  and  delivered  them  to  plaintiff, 
who  deposited  them  to  his  own  account  in  a  bank,  the  plaintiff  obtained 
no  title  to  the  instruments  and  is  not  entitled  to  recover  the  deposit  from 
the  bank  which,  on  discovering  the  forgery,  cancelled  the  credit  and  rein- 
bursed  the  bank  upon  which  the  checks  had  been  drawn. 

GerUng  v.  Metropolitan  Bank,  170  App.  Div.  (N.  Y.)  751. 

Any  person  taking  checks  made  payable  to  a  corporation,  which  can 
act  only  by  agents,  does  so  at  his  peril,  and  must  abide  by  the  consequences 
if  the  agent  who  indorses  the  same  is  without  authority,  imless  the  corpora- 
tion is  negligent  or  is  otherwise  precluded  by  its  conduct  from  setting  up 
such  lack  of  authority  in  the  agent  as  in  Phillips  v.  Mercantile  National 
Bank  of  N.  Y.,  140  N.  Y.  556,  35  N.  E.  982,  23  L.  R.  A.  584,  37  Am.  St. 
Rep.  596.     The  business  man  who  authorizes  his  clerk  to  take  his  checks 


FOEM   AND   INTERPRETATION  81 

to  his  bank  for  deposit  does  not  vest  in  her  so  dangerous  a  power  as  to 
preclude  him  from  setting  up  her  lack  of  authority  if  she  indorses  his  name 
thereon  in  blank  and  innocent  persons  cash  the  checks  for  her  without 
inquiry.  The  stringent  rules  of  agency  and  the  arbitrary  niles  of  the  law 
of  negotiable  paper  alike  protect  the  principal  from  such  tmauthorized 
acts.  If  greater  authority  has  been  conferred,  expressly  or  by  implication, 
or  if  the  principal  has  been  negligent  or  has  ratified  the  conduct  of  his 
agent,  the  law  will  not  shield  him. 

Standard  Steam  Specialty  Co.  v.  Conn.  Exchange  Bank  220  N.  Y. 
178,  116  N.  E.  386. 

See  also,  Stein  v.  Empire  Trust  Co.,  148  App.  Div.  (N.  Y.)  851; 
Oriental  Bank  v.  Gallo,  112  App.  Div.  360;  188  N.  Y.  610;  Seaboard 
National  Bank  v.  Bank  of  America,  193  N.  Y.  26;  Critten  v.  Chemical 
National  Bank,  171  N.  Y.  219;  First  National  Bank  v.  Whitman,  94  U.  S. 
343;  Ranch  v.  Bankers'  National  Bank,  143  111.  625;  Tibby  Bros.  v.  F. 
&  M.  Bank,  220  Pa.  1;  2  Morse  on  Banking,  Sec.  477;  Coggill  v.  American 
Exchange  Bank,  1  N.  Y.  113;  Dan.  Neg.  Int.  Sec.  1356;  Angelo  S.  A.  Bank 
v.  National  City  Bank,  146  N.  Y.  Supp.  457. 

Payments  made  upon  forged  indorsements  are  at  the  peril  of  the  bank 
imless  it  can  claim  protection  upon  some  principle  of  estoppel  or  by  reason 
of  some  negligence  chargeable  to  the  depositor. 

CraTviord  v.  West  Side  Bank,  100  N.  Y.  53;  Com  Ex.  Bank  v.  Nassau 
Bank,  91  N.  Y.  80;  Phoenix  Bank  v.  Risley,  HI  U.  S.  125;  Citizens'  Bank 
v.  Importers'  Bank,  119  N.  Y.  195;  Shipman  v.  Bank  S.  N.  Y.,  126  N.  Y. 
327. 

Where  one  knowingly  pays  a  note  to  which  his  name  is  forged,  does 
not  thereby  render  himself  liable  for  other  forgeries  of  his  name  by  the 
same  person,  where  those  dealing  with  the  forger  have  no  knowledge  that 
any  forged  paper  has  been  paid  and  have  not  been  injured  or  misled  or 
deceived  by  such  payment. 

Murphy  v.  Skinner,  160  Wis.  554. 

Estoppel. — Parties  are  often  estopped  from  asserting  defenses  which 
might  otherwise  have  been  available  in  view  of  previous  acts. 

Buckley  v.  Collins  (Ark.),  177  S.  W.  920;  Curtin  v.  Mining  Co.,  141 
Cal.  308;  Beatty  v.  College,  177  111.  280;  Van  Slyke  v.  Rooks,  181  Mich.  88; 
Bank  v.  Merkle,  97  Miss.  824;  Monongahela  Bank  v.  Weston,  172  N.  Y. 
259. 

Thus,  an  indorser  may  be  estopped  to  set  up  against  a  bona  fide 
holder  that  the  signature  of  the  maker,  drawer  or  prior  indorser  is  a  forgery. 

Richards  v.  Street,  31  App.  D.  C.  427. 


82  NEGOTIABLE   INSTRUMENTS   LAW 

And  an  indorser  whose  signature  is  alleged  to  be  forged  thereafter 
signs  a  waiver  of  notice  indorsed  on  the  note  is  thereafter  estopped  from 
denying  the  signatiire. 

Bowie  V.  Hume,  13  App.  D.  C.  286;  Beem  v.  Farrell,  135  Iowa,  670; 
Tumbull  V.  Bowyer,  40  N.  Y.  456. 

A  bank  is  relieved  from  responsibihty  for  raised  checks  which  it  has 
paid  after  the  account  was  balanced,  by  the  negHgence  of  the  depositor 
in  the  examination  of  the  returned  vouchers  and  comparison  with  the 
stubs  of  his  check  book,  which  would  have  disclosed  the  alterations  and 
prevented  subsequent  frauds. 

Critten  v.  Chemical  National  Bank,  171  N.  Y.  220. 

Silence  of  the  person  whose  signature  is  alleged  to  be  forged  will  work 
an  estoppel  on  the  theory,  "He  who  is  silent  when  conscience  requires  him 
to  speak  shall  be  debarred  from  speaking  when  conscience  requires  him 
to  keeo  silent." 

Tobias  v.  Morris,  126  Ala.  535;  Rothchild  v.  Title  G.  &  T.  Co.,  204 

N.  Y.  458. 

Where  a  depositor  learns  through  the  examination  of  his  returned 
checks  or  otherwise  that  a  paid  check  returned  as  a  voucher  has  been 
forged  as  to  the  signature,  or  has  been  altered  in  any  particular, it  becomes 
his  duty  to  give  notice  to  the  bank  without  delay,  and  failure  to  do  so  and 
the  bank  is  misled  to  its  injury,  the  bank  will  not  be  held  Hable  for  the  loss. 

Leather  Mfrs.  National  Bank  v.  Morgan,  117  U.  S.  96. 

The  burden  of  proof  is  on  the  bank  to  prove  that  it  has  been  injured 
by  the  neglect  of  the  depositor. 

Murphy  v.  MetropoHtan  National  Bank,  191  Mass.  159. 

But  in  McNeely  v.  Bank  of  North  America,  221  Pa.  588,  irrespective 
of  the  showing  of  damage  to  the  bank,  a  failure  of  prompt  notification  after 
discovery  of  the  forgery  relieves  the  bank  from  liability. 

In  Connors  v.  Old  Forge  Bank  (Pa.), 91  Atl.  210,  it  was  held  a  delay  of 
forty-three  days  after  knowledge  of  forgery  before  notifying  the  bank  was 
sufficient  to  deprive  him  of  the  right  of  recovery. 

Primarily  a  bank  may  pay  and  charge  to  its  depositors  only  such 
sums  as  are  duly  authorized  by  the  latter,  and  of  course  a  forged  check 
is  not  authority  for  such  payment.  It  is,  however,  permitted  to  a  bank 
to  escape  liability  for  repayment  of  amotints  paid  out  on  forged  checks  by 
establishing  that  the  depositor  has  been  guilty  of  negHgence  which  con- 
tributed to  such  payments  and  that  it  has  been  free  from  any  negligence. 
Morgan  v.  U.  S.  Mortgage  &  Trust  Co.,  208  N.  Y.  218,  222,  101  N.  E. 
871,  872,  L.  R.  A.  1915D,  741  Ann.  Cas.  1914D,  462. 

"If  the  depositor  has  by  his  negligence  *  *  *  caused  loss  to  his 
bank,  *  *  *  he  should  be  responsible   for  the   damage   caused  by  hie 


FOEM   AND    INTEKPEETATION  83 

default,  but  beyond  this  his  liability  should  not  extend.''  Critten  v. 
Chemical  Bank,  171  N.  Y.  219,  228,  63  N.  E.  969,  972  (57  L.  R.  A.  529). 
The  depositor's  liability  "is  limited  to  the  damages  sustained  by  the  bank 
in  consequence  of  such  neglect."  171  N.  Y.  229,  63  N.  E.  973,  57  L.  R.  A. 
529. 

See  also,  Bank  of  Danvers  v.  Bank  of  Salem,  151  Mass.  280;  Bank  of 
St.  Albans  v.  Farmers  &  Mechanics  Bank,  10  Vt.  141;  Bank  v.  Wood,  85 
Me.  204;  Carroll  v.  Safe  Co.,  HI  Md.  252;  Carmine  v.  Bowen,  104  Md.  198; 
Harris  v.  American  Building  Assn.,  122  Ala.  545 ;  Chester  v.  Wabash  R.  R., 
182  111.  382;  Belding  Mfg.  Co.  v.  Drury,  111  Mich.  41;  Ackerman  v.  True, 
175  N.  Y.  353;  Collier  v.  Miller,  137  N.  Y.  332;  Paul  v.  Kunz,  188  Pa.  St. 
504;  Flint  v.  Babbett,  59  Vt.  190;  Prieme  v.  Wis.  Land  Co.,  103  Wis.  537; 
Greey  v.  Dockendorf,  231  U.  S.  513;  Coal  Co.  v.  Trust  Co.,  197  Fed.  347; 
Dickerson  v.  Colgrove,  100  U.  S.  580;  Leather  Manufacturers'  Bank  v. 
Morgan,  117  U.  S.  96. 

Subsequent  wrongful  dealing  with  negotiable  paper  by  an  agent  who 
had  authority  to  indorse  his  principal's  name  to  it  does  not  constitute  the 
previous  signature  a  forgery  under  this  section. 

Salem  v.  Bank  of  N.  Y.,  110  App.  Div.  N.  Y.  636. 


84  NEGOTIABLE    INSTRUMENTS    LAW 

ARTICLE  4 
Consideration 

Section  50.  Presumption  of  consideration. 

51.  What  contributes  consideration. 

52.  What  constitutes  holder  for  value. 

53.  When  lien  on  instrument  constitutes  holder  for 

value. 

54.  Effect  of  want  of  consideration. 

55.  Liability  of  accommodation  party. 

§  50.  Presumption  of  consideration.  Every  negotiable 
instrument  is  deemed  prima  facie  to  have  been  issued  for  a 
valuable  consideration;  and  every  person  whose  signature 
appears  thereon  to  have  become  a  party  thereto  for  value. 

Negotiable  notes  and  bills  of  exchange  are  presiimed  to  have  been 
made  for  a  valid  and  adequate  consideration,  and  whether  they  purport 
to  have  been  given  for  value  received  or  not,  it  is  unnecessary  for  the 
plaintiff  in  the  first  instance  to  allege  or  prove  a  consideration.  In  this 
respect  they  differ  from  other  contracts. 

Foster  v.  Valentine,  48  Hun.  475. 

An  instrument  "Due  Klimball  $325  on  demand,"  is  a  promissory  note 
within  the  statute.  Neither  the  acknowledgment  of  value  received  or 
negotiable  words  are  essential. 

Kimball  v.  Huntington,  10  Wend.  675;  Carver  v.  Hayes,  67  Maine 
257;  Franklin  v.  Marsh,  6  N.  H.  364. 

But  in  Deyo  v.  Thompson,  53  App.  Div.  (N.  Y.)  9,  a  note  ''On  demand 
I  promise  to  pay  Helen  Deyo  three  hundred  dollars,"  does  not  import  a 
consideration,  and  the  burden  is  upon  a  party  sueing  on  such  a  note  to 
prove  the  existence  of  a  consideration  by  extrinsic  evidence. 

The  recital  for  "value  received"  in  the  body  of  a  note  constitutes  an 
admission  that  it  was  issued  for  a  consideration. 

Owen  V.  Blackburn,  161  App.  Div.  (N.  Y.)  829;  Durland  v.  Durland, 
153  N.  Y.  67;  Cartwright  v.  Gray,  127  N.  Y.  92;  First  National  Bank  v. 
Stallo,  160  App.  Div.  (N.  Y.)  702. 


CONSIDERATION"  85 

But  the  omission  of  the  words  does  not  in  any  way  affect  the  paper  or 
overcome  the  presumption  that  it  was  given  for  value. 

McLeod  V.  Hunter,  29  Misc.  (N.  Y.)  559;  Faymous  Shoe  Co.  v. 
Crosswhite,  124  Mo.  34. 

Where  a  complaint  in  an  action  upon  a  promissory  note  alleges  the 
making  of  the  note  by  the  defendant,  it  is  unnecessary  to  allege  delivery 
or  consideration,  for  both  are  presumed  from  the  issuance  of  the  instrument. 

Abrahamson  v.  Steele,  176  App.  Div.  865;  First  National  Bank  v. 
Stallo,  160  App.  Div.  702. 

An  acceptance  of  a  bill  cannot  as  against  a  bonafide  holder  for  value, 
defend  on  the  ground  that  the  acceptance  was  without  consideration. 

National  Park  Bank  v.  Saitta,  127  App.  Div.  (N.  N.)  624,  affirmed 
196  N.  Y.  548. 

The  maintenance  of  the  presumption  that  a  promissory  note  was  given 
or  indorsed  for  a  sufficient  consideration  justifies  the  maxim  "that  when 
one  by  his  carelessness  and  undue  confidence  has  enabled  another  to 
obtain  the  money  of  an  innocent  third  person,  he  must  answer  for  the  loss 
he  has  caused." 

Lassas  v.  McCarty,  47  Or.  483;  Bedell  v.  Herring,  77  Cal.  572. 

A  written  promise  by  a  stranger  in  the  form  of  a  note  given  to  a  husband 
in  order  that  he  might  deliver  the  same  to  his  wife,  to  whom  it  was  made 
payable,  in  order  to  secure  peace  between  a  newly  married  couple,  is  with- 
out consideration,  and  the  wife  cannot  recover  the  amount  from  the  maker 
thereof,  and  neither  the  possession  of  the  note  nor  the  use  of  the  words 
"value  received"  create  any  question  of  fact  for  the  jtu"y  in  an  action 
brought  upon  it. 

Kramer  v.  Kramer,  181  N.  Y.  477;  Strickland  v.  Henry,  175  N.  Y.  373. 

The  negotiation  of  a  promissory  note  in  violation  of  the  agreement 
under  which  it  was  given  is  a  breach  of  faith  and  fraud  upon  the  maker, 
and,  when  sued  thereon,  he  is  entitled  to  show  the  facts,  before  he  can  be 
called  upon  to  prove  that  the  plaintiff,  an  assignee  of  the  note,  was  not  a 
holder  for  value. 

Ginsberg  v.  Thurman,  71  Misc.  463;  German  Am.  Bank  v.  Cunning- 
ham, 97  App.  Div.  (N.  Y.)  244  and  cases  cited. 

One  cannot  make  his  own  note  the  subject  of  a  gift.  Such  a  note  is 
but  the  promise  of  the  donor  to  pay  money  in  the  future.  The  gift  is  not 
completed  until  the  money  is  paid.  There  is  no  delivery  of  the  gift  but 
the  mere  promise  to  deliver  it  in  the  future. 

Sullivan  v.  Sullivan,  92  S.  W.  (Ky.)  966;  Shugart  v.  Shugart,  76  S.  W. 
(Tenn.)  821;  Beatty  v.  Western  College,  177  111.  280;  School  v.  Sheidley, 
138  Mo.  672;  Richardson  v.  Richardson,  148  111.  563. 


86  NEGOTIABLE    INSTRUMENTS    LAW 

Consideration  generally,  Hickok  v.  Bunting,  92  App.  Div.  (N.  Y.) 
167;  First  National  Bank  v.  Stallo,  160  App.  Div.  (N.  Y.)  704;  Zimbleman 
V.  Finnegan,  118  N.  W.  312;  Hawkins  v.  Windhorst  (Kas.)  108  Pac.  805; 
Waxberg  v.  Stappler,  83  Misc.  78;  National  Discount  Co.  v.  Jenkins,  143 
Supp.  996. 

Burden  of  Proof. — The  plaintiffs  in  an  action  upon  a  promissory  note, 
to  which  the  defense  of  want  of  consideration  has  been  imposed,  are  entitled 
to  rest  after  reading  the  note  in  evidence,  as  that  raises  a  presumption  that 
the  note  is  a  valid  obligation  based  upon  a  good  and  legal  consideration, 
and  imposes  upon  the  defendant  the  biu-den  of  showing  a  want  of  considera- 
tion. If  the  defendant  offers  any  evidence  showing  or  tending  to  show  a 
want  of  consideration,  it  is  incumbent  upon  the  plaintiff  to  show  the  exist- 
ence of  a  sufficient  consideration  by  a  preponderence  of  evidence. 

Bringman  v.  Von  Glahn,  71  App.  Div.  (N.  Y.)  537;  Lombard  v.  Bryne, 
196  Mass.  236;  Perley  v.  Perley,  144  Mass.  104;  Simpson  v.  Davis,  119 
Mass.  269;  Durland  v.  Durland,  153  N.  Y.  67;  Camwright  v.  Gray,  127 
N.  Y.  92;  Hartford  National  Bank  v.  Gardner,  157  N.  Y.  Supp.  850; 
Harding  v.  U.  S.  Zinc  Co.,  157  N.  Y.  Supp.  852;  Hague  v.  Northern  Hotel 
Co.,  77  Misc.  142;  Dan.  Neg.  Inst.,  Sec.  164. 

If  no  evidence  is  introduced  by  the  defendant  showing  a  want  of  con- 
sideration, the  plaintiff  is  entitled  to  recover;  but  this  presumption  being 
rebutted,  the  burden  is  upon  the  plaintiff  to  show  by  a  preponderence  of 
evidence  that  there  was  a  consideration. 

Bourne  v.  Ward,  62  Me.  155;  16  Am.  Rep.  410;  Bank  v.  Seymour, 
64  Mich.  59;  Foote  v.  Valentine,  48  Hun.  475. 

In  a  contest  between  the  payee  of  a  bill  of  exchange  and  the  drawer 
thereof,  or  a  creditor  of  the  drawer,  over  the  proceeds  of  the  draft,  the  payee 
by  the  terms  of  the  Negotiable  Instrument  Law  is  presumed  prima  facie  to 
be  a  holder  for  value,  and  the  biirden  is  on  the  party  denying  it  to  prove 
the  contrary. 

Lynchburg  Co.  v.  National  Exchange  Bank,  109  Va.  639;  See  also, 
Lombard  v.  Bryne,  194  Mass.  288;  Carter  v.  Butler,  264  Mo.  330;  Bank 
of  Monticello  v.  Dooley,  113  Wis.  590. 

In  an  action  by  the  payee  against  the  maker  of  a  note  containing  on 
its  face  the  words  "value  received,"  a  motion  by  the  defendant  without 
putting  in  any  evidence  to  dismiss  the  complaint  on  the  ground  of  failure 
of  plaintiff  to  prove  a  consideration,  should  be  denied  since  the  burden  of 
proving  the  want  of  consideration  rests  on  the  defendant. 

Gerli  v.  Doorley,  151  N.  Y.  Supp.  574. 


CONSIDERATION  87 

§  51.  What  constitutes  consideration.  Value  is  any 
consideration  sufficient  to  support  a  simple  contract.  An 
antecedent  or  pre-existing  debt  constitutes  value;  and  is 
deemed  such  whether  the  instrument  is  payable  on  demand 
or  at  a  future  time. 

That  an  antecedent  debt  may  constitute  a  good  consideration,  see: 

Boston  Steel  Co.  v.  Steuer,  183  Mass.  140;  Evans  v.  Speer,  65  Ark. 
204;  Voss  v.  Chamberlain,  139  la.  569;  Mack  v.  Prang,  104  Wis.  1. 

An  old  debt  and  the  extension  of  time  for  the  payment  thereof  con- 
stitute "value." 

In  re  Progressive  Wall  Paper  Co.,  224  Fed.  143. 

This  and  the  preceding  section  being  applicable  only  to  negotiable 
instruments  as  defined  by  Sec.  20,  viz. — instruments  for  the  payment  of 
money  are  not  applicable  to  a  certificate  of  stock. 

Cowles  v.  Kiehl,  65  N.  Y.  Supp.  349;  American  Press  Assn.  v.  Braut- 
ingham,  75  App.  Div.  (N.  Y.)  435. 

The  delivery  of  the  old  note  was  a  sufficient  consideration  for  the  giving 
of  the  new  one,  and  the  defense  of  the  failure  of  consideration  of  the  first 
note  cannot  be  brought  against  the  second. 

Smith  V.  Smith,  35  Pac.  (Id.)  697;  Fidelity  Bank  v.  Miller,  162  Pac. 
245. 

But  in  Seager  v.  Drayton,  218  Mass.  571  is  held,  that  if  at  the  matur- 
ity of  a  note,  which  was  made  without  consideration,  the  maker  gives  a 
new  note,  the  new  note  is  also  without  consideration,  and  no  action  can  be 
maintained  against  the  maker. 

In  order  that  a  pre-existing  debt  may  be  a  sufficient  consideration  for 
the  accommodation  indorsement  of  a  note,  the  holder  must  show  that  he 
parted  with  something,  that  he  has  given  up  the  original  debt  or  the  right 
to  sue  on  it. 

Rogonski  v.  Brill,  131  N.  Y.  Supp.  589. 

The  enactment  of  the  section  has  not  changed  the  riile  that  to  consti- 
tute a  holder  for  value  of  accommodation  paper  received  for  an  antecedent 
debt,  it  must  be  taken  in  payment  and  discharge  thereof. 

Sutherland  v.  Mead,  80  App.  Div.  (N.  Y.)  103. 

If  the  consideration  of  the  note,  without  any  fault  of  the  defendant, 
failed  this  was  a  matter  of  defense  which  should  have  been  pleaded,  for  it 
cannot  be  inferred  that  the  privilege  was  not  worth  all  the  defendant 
promised  to  pay  for  it  or  that  the  plaintiff  was  unable  to  confer  it. 


88  NEGOTIABLE   INSTRUMENTS   LAW 

Equitable  Trust  Co.  v.  Newman,  69  Misc.  498;  Frank  v.  Wessils,  64 
N.  Y.  155. 

When  the  consideration  for  a  promissory  note  was  the  promise  of  the 
payee  to  do  certain  work,  the  fact  that  the  payee  fails  to  keep  his  promise 
makes  him  liable  for  damages,  but  does  not  constitute  a  failure  of  considera- 
tion, which  may  be  urged  as  a  defense  in  a  suit  on  the  note. 

Schiavone  v.  Lingarelli,  191  111.  App.  167. 

Mr.  Justice  Werner  of  the  Supreme  Court,  later  Associate  Justice  of 
the  Court  of  Appeals  of  New  York,  in  discussion  of  this  question  in  Brew- 
ster V.  Schrader,  26  Misc.  482,  said;  "The  language  of  this  section  when 
given  its  usual  and  ordinary  signification,  ought  to  leave  no  doubt  upon 
the  subject.  There  is,  however,  a  universal  disposition  among  lawyers  to 
look  for  some  hidden  or  subtle  meaning  in  the  most  simple  language.  If 
the  language  in  this  section  were  not  obviously  clear  and  unequivocal,  and 
there  were  need  of  ascertaining  the  legislative  intent,  the  history  of  the 
subject,  the  judicial  decisions  of  England  and  states  of  this  country, 
leave  no  possible  doubt  as  to  the  purpose  of  the  section." 

The  courts  of  England  and  our  federal  courts  have  held  that  a  bona 
fide  holder  of  a  negotiable  instnmient  who  takes  the  same  in  payment  of 
or  as  security  for  an  antecedent  debt,  is  a  holder  for  a  valuable  considera- 
tion, entitled  to  protection  against  all  equities  between  antecedent  parties. 
In  Railroad  Co.  v.  National  Bank,  102  U.  S.  26,  Mr.  Justice  Harden  in  an 
exhaustive  opinion  squarely  adopted  the  rule  that  the  taking  of  a  note  in 
payment  of,  or  as  security  for,  a  pre-existing  debt  constitutes  the  holder 
thereof  a  holder  for  value  in  the  usual  course  of  business. 

Supporting  the  above,  see  Mayer  v.  Heidelbach,  123  N.  Y.  332. 

See  also,  Sutherland  v.  Meade,  80  App.  Div.  (N.  Y.)  103;  Roseman 
V.  Mahoney,  86  App.  Div.  (N.  Y.)  377;  Bank  of  America,  103  App.  Div. 
(N.  Y.)  ZZ\  Milius  v.  Kauffman,  104  App.  Div.  (N.  Y.)  216;  Grocers  Bank 
V.  Penfield,  60  N.  Y.  502;  M'Bee  v.  Shoemaker,  160  N.  Y.  Supp.  254. 

A  promissory  note  given  for  the  purpose  of  making  a  gift  or  donation 
to  the  payee,  if  based  upon  no  other  consideration,  cannot  be  enforced  by 
the  payee  against  the  maker  or  his  estate.  The  note  is  only  an  executory 
obHgation,  a  promise  to  give,  but  not  an  extended  gift  until  the  note  is 
actually  paid. 

Abelman  v.  Haehnel,  57  Ind.  App.  15. 

A  valuable  consideration  is  necessary  to  support  any  contract,  and  the 
rule  makes  no  exceptions  as  to  the  character  of  the  consideration  respecting 
negotiable  instruments  when  the  consideration  is  open  to  inqmry.  There- 
fore, a  consideration  foimded  on  mere  love  and  affection,  or  gratitude,  is 
not  sufficient  to  sustain  a  suit  on  a  bill  or  note,  as,  for  instance,  when  a  bill 


CONSIDERATION  89 

or  note  is  accepted  or  made  by  a  parent  in  favor  of  a  child  could  not  be 
enforced  between  the  original  parties. 

Dan'l  Neg.  Inst.,  Sec.  179;  6  Am.  &  Eng.  Ency.  of  Law,  679;  Maynard 
V.  Maynard,  105  Me.  570;  Sullivan  v.  Sullivan,  92  S.  W.  (Ky.)  966. 

§  52.  What  constitutes  holder  for  value.  Where  value 
has  at  any  time  been  given  for  the  instrument,  the  holder  is 
deemed  a  holder  for  value  in  respect  to  all  parties  who  became 
such  prior  to  that  time. 

Variant. — The  Illinois  statute  substitutes  for  the  second  sentence, 
"An  antecedent  or  pre-existing  claim,  whether  for  money  or  not,  constitutes 
value  where  an  instrument  is  taken  either  in  satisfaction  thereof  or  as 
security  therefor,  and  is  deemed  such,  whether  the  instrtiment  is  payable 
on  demand  or  at  a  future  time."  The  Wisconsin  statute  adds  the  words: 
''discharged,  extinguished  or  extended"  after  the  words  "pre-existing 
debt." 


The  courts  of  New  York  at  first  refused  to  recognize  in  the  application 
of  this  section  the  legislative  intent  to  change  the  rule  that  had  been  fol- 
lowed in  1822,  and  followed  in  Coddington  v.  Bay,  20  Johns  637.  See 
Sutherland  v.  Mead,  80  App.  Div.  103,  107;  Roseman  v.  Mahoney,  86  Id. 
28,  affirmed  in  187  N.  Y.  115.  But  the  later  cases,  without  expressly  over- 
niling  these  decisions,  have  held  that  the  Negotiable  Instruments  Law  has 
changed  the  rule,  and  held  that  a  pre-existing  debt  without  extension  or 
forbearance  is  a  sufficient  consideration  to  constitute  a  holder  for  value. 

King  V.  BowHng  Green  Trust  Co.,  145  App.  Div.  398;  Maurice  v. 
Fowler,  78  Misc.  357;  Hall  Co.  v.  Todd,  139  Supp.  111. 

One  to  whom  a  promissory  note  was  indorsed  and  delivered  before 
maturity  in  payment  of  a  pre-existing  debt  is  a  holder  for  value,  and  in 
an  action  against  the  maker  the  equities  between  him  and  the  payee  are 
not  available  as  a  defense. 

Broderick  v.  Bascomb  Rope  Co.,  81  Misc.  199. 

Upon  exchange  of  promissory  notes,  each  note  is  a  valid  consideration 
for  the  other  and  is  fully  available  in  the  hands  of  its  holder. 

Rice  V.  Grange,  131  N.  Y.  149;  Nickerson  v.  Ruger,  84  N.  Y.  675; 
State  Bank,  etc.  v.  Smith,  155  N.  Y.  185;  Milius  v.  Kaufmann,  104  App. 
Div.  (N.  Y.)  444. 

The  presumption  that  the  indorsee  of  a  negotiable  note  is  a  bona  fide 
holder  for  value  is  not  repelled  merely  by  proof  that  the  paper,  as  between 
the  immediate  parties,  was  without  consideration. 

Joveshof  V.  Rockey,  109  N.  Y.  Supp.  818,  58  Misc.  559. 


90  NEGOTIABLE    INSTRUMENTS    LAW 

Where  a  depositor  in  a  bank,  having  sufficient  funds  standing  to  his 
credit,  tenders  to  the  bank  a  check  in  payment  for  negotiable  paper  it  has 
for  sale,  and  the  bank  accepts  the  check,  charges  it  against  the  deposit 
and  delivers  the  papers  purchased,  the  purchaser  is  a  holder  for  value,  and 
the  antecedent  debt  of  the  bank  being  pro  tanto  actually  and  in  fact 
extinguished. 

Mayer  v.  Heidelbach,  123  N.  Y.  332. 

A  valuable  consideration  sufficient  to  support  a  contract  may  con- 
sist of  some  right,  interest  or  benefit  accruing  to  one  party,  or  some  for- 
bearance, detriment,  loss  or  responsibility  given,  suffered  or  undertaken 
by  the  other. 

Union  Bank  v.  Sullivan,  214  N.  Y.  332. 

Although  a  bank  does  not  become  a  holder  for  value  by  merely  placing 
the  proceeds  of  the  discotmt  of  a  note  to  the  credit  of  the  payee,  yet  when 
it  holds  a  note  of  the  payee  due  on  that  day  and  pays  the  same  by  the 
application  of  the  discotmt,  it  becomes  a  holder  for  value. 

Van  Norden  Trust  Co.  v.  Rosenberg,  123  App.  Div.  (N.  Y.)  727. 

Where  a  bank  discounts  paper  for  a  depositor  who  is  not  in  its  debt, 
and  gives  him  credit  upon  the  books  for  the  proceeds  of  said  paper,  it  is 
not  a  bona  fide  holder  for  value,  so  as  to  be  protected  against  infirmities  in 
the  paper,  unless  in  addition  to  the  mere  fact  of  crediting  the  depositor 
with  the  proceeds  of  the  paper,  some  other  and  valuable  consideration 
passes.  Such  a  transaction  simply  creates  the  relation  of  debtor  and 
creditor  between  the  bank  and  the  depositor,  and  so  long  as  that  relation 
continues  the  bank  is  held  subject  to  the  equities  of  the  prior  parties, 
even  though  the  paper  had  been  taken  before  maturity  and  without  notice. 

Bank  v.  Valentine,  18  Hun.  417;  Bank  v.  Newell,  71  Wis.  309;  Bank 
V.  Huver,  114  Pa.  216;  Dresser  v.  Missouri  Co.,  93  U.  S.  227;  DreilHng  v. 
Bank,  43  Kan.  197;  McNight  v.  Parsons,  136  la.  390;  Security  Bank  v. 
Pretuschke,  101  Minn.  478;  Grocery  Co.  v.  Bank,  48  S.  (Ala.)  340. 

In  order  to  constitute  one  the  holder  of  a  negotiable  instrument  for 
value  it  is  not  necessary  that  he  part  with  present  consideration. 

King  V.  Bowling  Green  Trust  Co.,  145  App.  Div.  (N.  Y.)  399. 

The  uniform  interpretation  of  the  section  has  been  to  continue  and 
confirm  the  rule  of  the  common  law  that  a  payee  might  claim  the  protection 
accorded  any  other  bona  fide  holder  for  value. 

Boston  Iron  &  Steel  Co.  v.  Steuer,  183  Mass.  140;  Merseck  v.  Alder- 
man, 77  Conn.  634;  South  Boston  Iron  Co.  v.  Brown,  63  Me.  139;  Camp- 
bell V.  Fourth  National  Bank,  137  Ky.  555;  American  Exch.  Bank  v.  Arm- 
strong, 133  U.  S.  443. 

Possession  of  a  negotiable  note  properly  indorsed  is  prima  facie 
evidence  that  the  holder  is  a  bona  fide  purchaser. 


CONSIDERATION  91 

Manhattan  Sav.  Inst.  v.  N.  Y.  National  Bank,  107  N.  Y.  58;  Clark 
V.  Skeen,  61  Kan.  526. 

And  if  the  defendant  admits  the  execution  of  the  note  in  suit,  but 
denies  that  the  holder  is  the  owner  thereof  by  purchase  before  maturity, 
and  alleges  want  of  consideration,  the  burden  of  proving  such  allegations 
is  on  the  defendant. 

Yates  V.  Spofford,  7  Idaho  737,  97  Am.  St.  Rep.  267. 

§  53.  When  lien  on  instrument  constitutes  holder  for 
value.  Where  the  holder  has  a  lien  on  the  instniment,  arising 
either  from  contract  or  by  implication  of  law,  he  is  deemed  a 
holder  for  value  to  the  extent  of  his  lien. 

The  pledgee  has  the  right  to  enforce  the  collection  of  a  collateral 
even  though  the  principal  debt  is  not  yet  due. 

Seely  v.  Wiestrom,  49  Neb.  730;  Elk  Coal  Co.  v.  Third  National 
Bank,  157  Ky.  619;  Field  v.  Sibley,  74  App.  Div.  (N.  Y.)  81. 

Recovery  can  be  had  only  to  the  extent  of  the  debt  for  which  the 
paper  is  held  as  collateral  security. 

Brown  v.  Calloway,  41  Ark.  418;  Fisher  v.  Am.es,  98  Mass.  303; 
Union  Bank  v.  Roberts,  45  Wis.  373. 

Unless  an  accommodation  note  is  shown  to  have  been  appropriated 
by  the  payee  to  some  purpose  other  than  for  which  it  was  given,  the  maker 
cannot  set  up  the  want  of  consideration  in  an  action  by  one  who  has 
acquired  the  note  in  good  faith,  in  the  ordinary  course  of  business  for 
value,  although  after  maturity. 

Mersick  v.  Alderman,  77  Conn.  634;  Dunn  v.  Weston,  71  Me.  270; 
Miller  v.  Lamed,  103  111.  562;  Maitland  v.  Citizens'  Bank,  40  Md.  540. 

If  a  negotiable  promissory  note,  which  is  without  consideration  as 
between  the  original  parties  thereto,  is  delivered  without  consideration 
to  another  person,  who  pledges  it  before  its  maturity,  as  collateral  security 
for  a  debt  of  his  own  of  less  amoimt  than  the  face  of  the  note,  the  pledgee, 
if  they  take  it  AAdthout  notice,  are  to  be  deemed  holders  for  value,  and  may 
maintain  an  action  thereon  for  the  amount  due  to  them  upon  the  debt 
which  it  was  pledged  to  seciu"e. 

Fisher  v.  Fisher,  98  Mass.  303;  Miller  v.  Pollock,  99  Pa.  St.  202. 

Where  there  is  no  other  person  entitled  to  receive  the  surplus,  the 
pledgee  can  recover  only  the  amount  of  the  debt  secured. 

Stoddard  v.  Kimball,  60  Mass.  469. 

In  an  action  on  a  promissory  note  held  as  collateral  security,  the 
holder  is  entitled  to  judgment  for  the  whole  amount  due  on  it  with  liability 
to  account  for  the  surplus  to  the  owner  of  the  note. 


92  NEGOTIABLE   INSTRUMENTS   LAW 

Camden  Bank  v.  Fries,  214  Pa.  St.  395. 

Payment  in  amoimt  beyond  that  for  which  it  was  pledged  nor  for  a 
debt  for  which  it  was  not  pledged  cannot  be  had  against  an  accommodation 
maker. 

C.  N.  Bank  v.  Bell,  125  N.  Y.  42. 

§  54.  Effect  of  want  of  consideration.  Absence  or  fail- 
ure of  consideration  is  matter  of  defense  as  against  any  per- 
son not  a  holder  in  due  course ;  and  partial  failure  of  considera- 
tion is  a  defense  pro  tanto  whether  the  failure  is  an  ascertained 
and  liquidated  amount  or  otherwise. 

As  between  the  original  parties  to  a  promissory  note  and  others 
having  notice,  a  conditional  delivery,  as  well  as  want  of  consideration, 
may  be  shown;  and  parol  evidence  that  the  delivery  was  conditional 
and  of  the  terms  of  the  condition  is  not  open  to  the  objection  of  varying 
or  contradicting  the  written  contract. 

Higgins  V.  Ridgway,  153  N.  Y.  130;  Benton  v.  Martin,  52  N.  Y.  570; 
Bookstaver  v.  Jayne,  60  N.  Y.  146;  Breneman  v.  Fumiss,  90  Pa.  St.  186. 

A  consideration  moving  from  one  of  several  joint  makers  of  a  promis- 
sory note  is  good  as  to  all. 

First  National  Bank  v.  Hopper,  89  Neb.  377. 

Where  there  was  a  good  consideration  for  a  draft  when  it  was  accepted, 
but  subsequently  such  consideration  entirely  failed,  held  that  the  failure 
of  consideration  was  a  good  defense  to  any  action  upon  the  paper  brought 
by  the  transferee. 

Leslie  v.  Bassett,  129  N.  Y.  523;  Ferguson  v.  Netter,  41  App.  Div. 
(N.  Y.)  274;  reversed  204  N.  Y.  505. 

Upon  an  exchange  of  promissory  notes,  each  note  is  a  valid  con- 
sideration for  the  other  and  constitutes  a  good  consideration  as  an  exchange 
of  property. 

Cobb  V.  Titus,  10  N.  Y.  198;  Rice  v.  Grange,  131  N.  Y.  149;  Newman 
V.  Frost,  52  N.  Y.  422;  Williams  v.  Banks,  11  Md.  198. 

Although  a  note  itself  is  prima  facie  evidence  of  a  consideration,  the 
question  is  always  open  as  between  the  immediate  parties;  and  it  is  com- 
petent for  the  defendant  to  show,  by  parol,  that  there  was  no  sufficient 
consideration,  or  that  the  consideration  has  failed,  or  that  the  paper 
was  given  for  accommodation  merely. 

Cowee  V.  Cornell,  75  N.  Y.  91;  Batterman  v.  Butcher,  95  App.  Div. 
(N.  Y.)  213;  Anthony  v.  Valentine,  130  Mass.  119;  Franz  v.  Schiro,  136 
La.  842;  Ingersoll  v.  Marten,  58  Md.  67;  Finer  v.  Brittain,  165  N.  C.  401; 
Gresham  Bank  v.  Walch,  157  Pac.  Rep.  (Ore.)  534. 


CONSIDERATION  93 

The  law  presumes  that  a  note  regular  on  its  face  is  a  valid  obligation 
based  upon  a  good  and  legal  consideration,  and  the  burden  of  showing 
that  there  was  a  want  of  consideration  rests  upon  the  defendant. 

Durland  v.  Durland,  153  N.  Y.  67;  Bringman  v.  VonGlahn,  71  App. 
Div.  (N.  Y.)  537;  Janvey  v.  Loketz,  122  App.  Div.  (N.  Y.)  410;  Lynds  v. 
Van  Valkenberg,  77  Kas.  24;  Finer  v.  Brittain,  165  N.  C.  401. 

An  acceptor  of  a  bill  cannot,  as  against  a  bona  fide  holder  for  value, 
defend  on  the  ground  that  the  acceptance  was  without  consideration,  or 
for  accommodation. 

National  Park  Bank  v.  Saitta,  127  App.  Div.  (N.  Y.)  624. 

The  maker  of  a  note  who  induces  another  to  purchase  it  from  the 
payee,  assuring  him  that  it  was  valid  and  will  be  paid,  cannot  set  up  the 
illegality  of  the  consideration  against  the  assignee,  who  had  no  notice 
thereof. 

Holzbog  V.  Bokrow,  156  Ky.  161. 

Partial  failure  of  consideration  is  a  defense  to  an  action  on  a  note, 
only  to  the  extent  of  the  injury  sustained  by  such  failure. 

Black  V.  Ridgway,  131  Mass.  80;  Carter  v.  Butler,  264  Mo.  307; 
Finance  Co.  v.  Schroder,  74  W.  Va.  68;  Cline  v.  Miller,  8  Md.  274;  Davis  v. 
Wait,  12  Oregon  425. 

Although  a  bank  does  not  become  a  holder  for  value  by  merely 
placing  the  proceeds  of  the  discount  of  a  note  to  the  credit  of  the  payee, 
yet  when  it  holds  a  note  of  the  payee  due  on  that  day  and  pays  the  same 
by  application  of  the  discount,  it  becomes  a  holder  for  value. 

Wallabout  Bank  v.  Peyton,  123  App.  Div.  (N.  Y.)  727. 

An  assignee  of  a  draft  after  maturity  and  for  a  nominal  consideration, 
is  not  a  holder  in  due  course  within  the  meaning  of  this  section. 

Ferguson  v.  Netter,  141  App.  Div.  (N.  Y.)  274. 

§  55.  Liability  of  accommodation  party.  An  accommo- 
dation party  is  one  who  has  signed  the  instrument  as  maker, 
drav^er,  acceptor  or  indorser,  w^ithout  receiving  value  therefor, 
and  for  the  purpose  of  lending  his  name  to  some  other  person. 
Such  a  person  is  liable  on  the  instrument  to  a  holder  for  value, 
notwithstanding  such  holder  at  the  time  of  taking  the  instru- 
ment knew  him  to  be  only  an  accommodation  party. 

Variant. — The  Illinois  statute  omits  the  words  "without  receiving 
value  therefor"  in  first  sentence  and  at  the  end  of  the  section  adds,  "and 
in  case  a  transfer  after  maturity  was  intended  by  the  accommodating 
party,  notwithstanding  such  holder  acquired  title  after  maturity." 


94  NEGOTIABLE   INSTRUMENTS   LAW 

The  clause  "without  receiving  value  therefor"  is  misleading  and  the 
courts  have  interpreted  to  mean  without  receiving  value  for  the  bill  itself 
and  not  without  receiving  consideration  for  lending  his  name.  Thus  A, 
who  receives  $25  for  signing  his  name  and  received  no  value  for  the  instru- 
ment, is  an  accommodation  party. 

Morris  County  Brick  Co.  v.  Austin  (N.  J.)  75  Atl.  550. 

Liability  of  accommodation  maker. — When  a  promissory  note,  made 
by  the  maker  for  the  accommodation  of  the  payee  with  the  intent  that 
the  payee  should  raise  the  money  thereon,  is  discounted  by  a  bank  for  the 
benefit  of  the  payee,  with  knowledge  of  its  accommodation  character, 
the  action  of  the  bank  in  extending,  after  the  maturity  of  the  note,  the 
time  of  payment  thereof,  without  the  knowledge  or  consent  of  the  accom- 
modation maker,  does  not  discharge  the  accommodation  maker. 

National  Citizens  Bank  v.  Toplitz,  81  App.  Div.  (N.  Y.)  593;  English 
V.  Schlesinger,  55  Misc.  584. 

Unless  an  accommodation  note  is  shown  to  have  been  appropriated 
by  the  payee  to  some  piupose  other  than  for  which  it  was  given,  the  maker 
cannot  set  up  the  want  of  consideration  in  an  action  by  one  who  has 
acquired  the  note  in  good  faith,  in  the  ordinary  course  of  business  and  for 
value,  although  after  matiuity. 

Mersick  v.  Alderman,  77  Conn.  635 ;  Benjamin  v.  Rogers,  126  N.  Y.  60. 

The  very  purpose  of  the  accommodation  would  be  defeated  if  knowl- 
edge of  the  fact  that  the  responsible  party  was  acting  as  an  accommodator 
were  a  good  defense  in  an  action  by  a  party  who  parted  with  value  relying 
upon  the  credit  of  the  accommodating  party. 

English  V.  Schlesinger,  105  N.  Y.  Supp.  990;  Black  v.  Bank  of  West- 
minister, 96  Md.  418;  Dunn  v.  Weston,  71  Me.  270;  Miller  v.  Lamed,  103 
111.  562-570;  Maitland  v.  Citizens'  Bank,  40  Md.  540;  Marling  v.  Jones, 
138  Wis.  83. 

Where  at  the  solicitation  of  the  cashier  of  a  bank  and  for  the  purpose 
of  making  good  an  overdraft  by  a  customer  of  the  bank,  a  third  person 
without  receiving  any  consideration  delivers  to  the  cashier,  who  knows 
of  such  lack  of  consideration,  his  check  drawn  upon  a  second  bank,  payable 
to  his  own  order  and  indorsed  by  him  to  be  deposited  to  the  credit  of  the 
overdrawn  account,  the  first  bank  is  not  a  party  accommodated  and 
can  recover  from  the  drawer  of  the  check. 

Neal  V.  Wilson,  213  Mass.  336;  Jennings  v.  Wall,  217  Mass.  284. 

No  consideration  moving  to  the  accommodation  maker  is  necessary 
to  uphold  an  accommodation  note,  the  consideration  supporting  his 
promise  being  that  parted  with  by  the  person  taking  the  note  and  received 
by  the  person  accommodated. 

Marling  v.  Jones,  138  Wis.  82. 


CONSIDEEATIO]!?'  95 

A  transferee  of  negotiable  paper  who  takes  it  knowing  that  it  was 
executed  by  an  accommodation  maker,  and  transferred  in  violation  of 
the  conditions  or  limitations  imposed  by  such  maker,  cannot  maintain 
an  action  thereon  against  him. 

Benjamin  v.  Rogers,  126  N.  Y.  60;  U.  S.  N.  Bank  v.  Ewing,  131  N.  Y. 
506. 

A  wife  is  not  an  accommodation  maker  of  a  promissory  note  where 
the  note  is  given  in  payment  of  a  transaction  in  which  she  has  a  property 
or  pecuniary  interest,  such  for  instance  as  the  payment  for  labor  and 
materials  in  the  construction  of  a  house  by  the  husband  on  land  owned 
by  the  wife. 

Brayer  v.  Edell,  163  N.  Y.  Supp.  989. 

Liability  of  accommodation  indorser. — An  accommodation  indorser 
of  a  raised  check  was  liable  to  a  bank  paying  the  same  for  the  difference 
between  the  amoimt  of  the  check  as  originally  drawn,  and  the  amount 
to  which  it  was  raised. 

Cooley  V.  Cvirran,  104  N.  Y.  Supp.  751;  Smith  v.  State  Bank,  54 
Misc.  550. 

If  the  note  be  raised  by  the  maker,  without  the  knowledge  of  the 
accommodation  indorser,  subsequent  to  such  indorsement,  the  accommo- 
dation indorser  is  only  liable  for  the  amount  of  the  note  as  indorsed  by  him. 

Packard  v.  Windholz,  88  App.  Div.  (N.  Y.)  365;  Smith  v.  State  Bank, 
54  Misc.  550. 

A  person  who  indorses  a  note  for  the  accommodation  of  the  maker, 
without  knowledge  that  the  note  is  to  be  used  for  the  benefit  of  the  maker, 
is  not  relieved  from  liability  to  a  person  to  whom  the  maker  negotiates  it 
for  value,  simply  because  the  latter  knew  the  accommodation  nature  of 
the  indorsement. 

Packard  v.  Windholz,  88  App.  Div.  (N.  Y.)  365. 

This  section  was  not  intended  to  prevent  the  courts  from  determining 
in  equity  all  questions  between  an  insolvent  holder  of  a  note  and  one 
primarily  liable  for  the  indebtedness  on  the  instrument  as  a  matter  of 
fact,  whether  maker  or  indorser. 

Building,  etc.,  Co.  v.  Northern  Bank,  206  N.  Y.  400;  U.  S.  N.  Bank 
V.  Ewing,  131  N.  Y.  506. 

One  who  indorses  a  promissory  note  without  consideration  for  the 
accommodation  of  the  maker,  becomes  simply  a  surety. 

Easton  Mfg.  Co.  v.  Caminez,  146  App.  Div.  (N.  Y.)  436;  Maurice  v. 
Fowler,  78  Misc.  357. 


96  NEGOTIABLE   INSTRUMENTS   LAW 

The  payee's  extension  of  time  on  a  note  does  not  release  the  accom- 
modation indorsers  on  a  collateral  note. 

Commercial  National  Bank  v.  Sanders  (La.)  71  S.  Rep.  891. 

The  fact  that  the  indorsee  for  value  of  a  promissory  note  knew  that 
it  was  an  accommodation  note  between  the  original  parties,  is  not  a 
defense  to  an  action  by  him  on  the  note. 

Black  V.  Bank  of  Westminister,  96  Md.  399;  Cotrell  v.  Watkins,  89 
Va.  816;  National  Bank  of  Newport  v.  Snyder,  117  App.  Div.  (N.  Y.)  37. 

Partner  as  accommodation  party. — Where  the  signature  of  the  firm 
is  designated  as  that  of  a  surety,  or  when  there  is  anything  in  the  appear- 
ance of  the  note  to  charge  the  holder  vnth  knowledge  that  the  signature 
is  used  by  the  way  of  accommodation,  the  holder  cannot  recover  without 
showing  the  assent  of  all  the  partners;  for  it  is  not  within  the  usual  scope 
of  partnership  business  to  assume  a  liability  for  the  debt  of  another. 

Clement  Bank  v.  Connolly,  88  Vt.  57;  1  Dan.  Neg.  Inst.  Sec.  365; 
National  Bank,  etc.  v.  Law,  127  Mass.  72;  Bank  of  Commerce  v.  Selden, 
3  Minn.  155 ;  Sherwood  v.  Snow,  46  Iowa  481 ;  26  Am.  Rep.  155 ;  Vosburg  v. 
Diefendorf,  119  N.  Y.  357;  Smith  v.  Weston,  159  N.  Y.  194;  Tanner  v. 
Hall,  1  Pa.  St.  417;  Atlas  v.  Savery,  127  Mass.  75. 

The  law  as  to  the  liability  on  partnership,  the  subject  is  well  stated 
in  Stall  V.  Catskill  Bank,  18  Wend.  466,  where  the  court  stated,  "It  is 
no  part  of  the  ordinary  business  of  a  mercantile  firm  to  make  or  indorse 
notes  as  sureties  for  third  persons,  or  to  pay  the  private  debts  of  the 
individual  partners,  and  of  course  there  is  no  implied  authority  for  one 
member  to  indorse  or  affix  the  name  of  the  firm  to  negotiable  paper,  in 
which  the  partnership  has  no  interest,  for  such  purposes.  If,  therefore, 
it  appears  upon  the  face  of  the  paper,  that  the  partnership  name  is  signed 
as  a  mere  surety  for  some  other  person,  the  party  who  takes  the  note  from 
such  person  has  actual  notice  of  the  fact  that  it  is  not  signed  in  the  ordinary 
course  of  business.  He  must,  therefore,  at  his  peril,  make  the  necessary 
inquiries,  and  ascertain  that  there  was  some  special  authority  for  one 
partner  to  sign  the  partnership  name  as  such  surety,  either  expressed  or 
implied.  So  if  the  drawer  of  a  note  carries  it  to  the  bank  to  get  it  dis- 
counted on  his  own  account,  or  transfers  it  to  a  third  person  with  the  firm 
name  indorsed  thereon,  the  transaction  oh  its  face  shows  that  it  is  a  mere 
accommodation  indorsement,  or  the  note  would  be  in  the  hands  of  the 
drawer;  and  the  bank  or  the  person  who  receives  it  from  the  drawer,  being 
thus  chargeable  with  notice  that  the  firm  is  a  mere  surety  of  the  drawer 
and  the  members  of  the  firm  who  have  been  made  sureties  without  their 
consent,  are  not  liable  to  such  holders  of  the  note." 


CONSIDERATION  97 

Partnership  accommodation  paper. 


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J.  K.  VAN  CAMPEN 
WESTON  BROS. 

In  the  above  case  Weston  Bros,  indorsed  for  accommodation  of  the 
makers  without  consideration  or  without  authority.  The  plaintiff  in 
taking  the  note  knew  he  was  deahng  with  one  of  the  makers  of  the  note 
when  he  took  it  from  the  payee,  and  he  also  knew  Mr.  Van  Campen,  either 
as  maker  or  first  indorser,  coiild  not  be  expected  to  have  possession  of  the 
note  if  it  had  passed  through  the  firm  of  Weston  Bros,  in  the  ordinary 
course  of  business.  He  was  therefore  put  upon  inquiry,  which,  if  made 
in  the  proper  quarters,  would  have  disclosed  the  fact  that  the  second 
indorsement  was  made  without  authority. 

Corporation  accommodation  paper. — A  banking  corporation  may 
become  the  indorser  of  and  procure  paper  owned  by  it  to  be  discoimted 
for  the  use  and  benefit  of  the  banking  corporation,  but  it  is  not  authorized 
to  make  an  accommodation  indorsement. 

Bank  of  Genesee  v.  Patchin  Bank,  13  N.  Y.  309. 

When  an  individual  signs  a  note  as  an  accommodation  maker  or 
indorser  for  the  benefit  of  another,  he  is  liable  to  a  subsequent  holder  for 
value,  although  the  holder  knew  him  to  be  an  accommodation  party. 
But  the  rule  does  not  hold  in  the  case  of  a  manufacturing  corporation  which 
has  no  power  to  bind  itself  as  an  accommodation  party. 


98  NEGOTIABLE   INSTRUMENTS   LAW 


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JsA^^'z2:^^6c<n^  -^^cr. 


{INDORSED) 
SNYDER  MANUFACTURING  CO. 
NEWPORT  KNITTING  CO. 

The  National  Bank  of  Newport  held  the  foregoing  note  which  it  received 
from  the  Newport  Knitting  Company,  executed  by  Homer  P.  Snyder, 
who  was  a  director  in  both  corporations,  the  Newport  Knitting  Company 
and  the  Snyder  Manufacturing  Company ;  in  fact,  Snyder  and  two  others 
composed  the  majority  of  directorate  in  each  company.  The  Court,  in 
,an  action  commenced  by  the  National  Bank  of  Newport  v.  Snyder  Mfg. 
Co.  (117  App.  Div.  373)  held,  that  a  manufacturing  corporation  has  no 
power  to  bind  itself  as  accommodation  party. 

Bank  of  Genesee  v.  Patchin  Bank,  13  N.  Y.  309;  National  Park 
Bank  v.  German  Am.  M.  W.  Co.,  116  N.  Y.  281;  Fox  v.  Rural  Home  Co., 
90  Hun.  365. 

Notwithstanding  the  general  rule  a  corporation  is  bound  if  it  makes 
or  indorses  commercial  paper  for  the  accommodation  of  another  in  respect 
to  a  bona  fide  holder  who  discoimts  it  before  maturity  on  the  faith  of  its 
being  business  paper. 

Mechanics  Bank  v.  White,  35  N.  Y.  505. 

The  decision  in  the  above  cited  case  and  other  similar  decisions  are 
based  upon  the  assumption  that  the  officers  making  or  indorsing  a  promis- 
sory note  had  authority  from  the  corporation  to  make  or  indorse  such 
notes  in  the  ordinary  course  of  business.  Such  decisions  do  not  apply 
to  a  case  where  the  officers  purporting  to  act  for  a  corporation  do  not  have 
authority  to  sign  commercial  paper  in  the  ordinary  course  of  business. 
An  officer  of  a  corporation  has  no  power  to  make  promissory  notes  in  its 
name  unless  such  power  is  expressly  given  to  such  officer  by  the  by-laws 
of  the  corporation  or  by  resolution  of  its  board  of  directors. 

National  Bank  of  Newport  v.  Snyder,  107  App.  Div.  (N.  Y.)  95; 
Niagara  Falls  Co.  v.  Bachman.  66  N.  Y.  261 ;  Peoples  Bank  v.  St.  Anthony's 


CONSIDERATIOIT  99 

Church,  109  N.  Y.  512;  Newman  v.  Newman,  160  App.  Div.  (N.  Y.)  331; 
Black  V.  Bank  of  Westminister,  96  Md.  400;  Hall  v.  Auburn  Turnpike 
Co.,  27  Cal.  256. 

It  is  essential  for  one  claiming  that  another  is  equitably  estopped 
from  denying  liability  because  of  previous  acts  to  show  that  he  was  in- 
fluenced by  and  relied  upon  such  acts  in  making  the  promise  or  performing 
the  act  upon  which  the  liability  is  asserted. 

Jacobus  V.  Jamestown,  211  N.  Y.  154. 

On  proof  that  the  indorsement  was  for  the  accommodation  of  the 
maker,  the  burden  shifts  to  the  plaintiff  to  show  that  he  was  a  holder  for 
value  and  became  such  without  notice  that  the  corporation  was  an  accom- 
modation indorser. 

Jacobus  V.  Jamestown,  211  N.  Y.  154,  159;  National  Park  Bank  v. 
German  Am.,  etc.,  116  N.  Y.  281;  Abbott  v.  LePrevost,  166  App.  Div. 
(N.  Y.)  43. 

Every  person  who  enters  into  a  contract  with  a  corporation  is  bound 
at  his  peril  to  take  notice  of  the  legal  limits  of  its  capacity  and  powers  of 
its  officers. 

Davis  V.  Old  Colony  R.  R.,  131  Mass.  258;  Cox  v.  North  Brew.  Co., 
245  Pa.  St.  418;  Fox  v.  Rural  Home,  90  Hun.  365. 

.An  accommodation  indorsement  of  a  note  by  a  corporation  is  ultra 
vires  and  cannot  be  enforced  by  one  who  takes  the  note  with  notice  that 
the  indorsement  was  without  consideration. 

Brill  Co.  V.  Norton,  etc.,  R.  R.,  189  Mass.  431;  Carlaftes  v.  Gold- 
meyer  Co.,  72  Misc.  75. 

Accommodation  paper  executed  by  agent. — A  general  power  of  an 
agent  to  make  or  indorse  negotiable  paper  on  behalf  of  his  principal  will 
not  warrant  the  agent  in  putting  the  name  of  his  principal  to  the  paper 
for  the  accommodation  of  the  agent  or  a  third  person,  and  in  the  absence 
of  express  authority  the  principal  will  not  be  bound  by  accommodation 
paper  made  in  his  name  by  an  agent. 

Allen  V.  First  National  Bank,  127  Pa.  St.  51 ;  Hall  v.  Auburn  Turnpike 
Co.,  27  Cal.  255;  87  Am.  Dec.  75. 

Married  woman  as  accommodation  party. — If  a  promissory  note, 
although  made  in  fact  by  a  married  woman,  embodies  a  contract  that  she 
is  disabled  by  law  from  making,  it  never  becomes  her  promissory  note. 

The  Peoples'  Bank  v.  Schepflin,  73  N.  J.  L.  29. 

If  a  married  woman  signs  as  accommodation  indorser  the  note  of  a 
partnership  of  which  her  husband  is  a  member  and  the  business  manager, 
payable  to  him  and  indorsed  also  by  him,  she  is  liable  on  her  indorsement. 

Middlcborough  Bank  v.  Cole,  191  Mass.  169. 


100  NEGOTIABLE   INSTRUMENTS   LAW 

A  note  executed  by  a  woman  to  enable  her  husband  to  borrow  money 
from  an  estate  of  which  he  is  trustee,  is  not  accommodation  paper,  since 
the  purpose  for  which  it  may  be  used  is  restricted. 

Burr  V.  Beckler,  264  111.  230. 

Order  of  Liability. — Promissory  notes  made  and  indorsed  and  dis- 
counted by  the  payee  under  an  agreement  between  them  that  the  maker 
and  indorser  shall  each  receive  one-half  of  the  proceeds  and  pay  one-half 
of  the  notes,  are  not  accommodation  paper. 

Reyburn  v.  Queen  City  Bank,  171  Fed.  Rep.  609. 

Accommod,ation  parties  to  commercial  paper  are  liable  to  each  other 
in  succession  as  their  names  appear  upon  the  instrument  unless  they 
specially  agree  that  they  are  to  be  bound  jointly  and  not  severally,  which 
fact  may  be  proven  by  parol. 

Noble  V.  Beeman,  etc.,  65  Or.  93;  Bradley  Engineering  Co.  v.  Hey- 
bum,  56  Wash.  629;  Haddock  v.  Haddock,  118  App.  Div.  (N.  Y.)  412; 
192  N.  Y.  510. 

Parol  evidence  is  necessary  to  determine  whether  a  party  to  an 
instnmient  including  an  indorser  thereon  is  an  accommodation  party, 
and  also  to  determine  which  other  party  to  the  instrument  he  had  accom- 
modated. 

Haddock  v.  Haddock,  192  N.  Y.  510. 

Parol  evidence  is  admissible  to  show  that  a  note  was  made  for  the 
accommodation  of  the  payee. 

Ryan  v.  Sullivan,  143  App.  Div.  471. 


NEGOTIATION  101 

ARTICLE  5 
Negotiation 

Section  60.  What  constitutes  negotiation. 

61.  Indorsement;  how  made. 

62.  Indorsement  must  be  of  entire  instrument. 

63.  Kinds  of  indorsement. 

64.  Special  indorsement;  indorsement  in  blank. 

65.  Blank  indorsement;  how  changed  to  special  in- 

dorsement. 

66.  When  indorsement  restrictive. 

67.  Effect   of     restrictive     indorsement;     rights     of 

indorsee. 

68.  Qualified  indorsement. 

69.  Conditional  indorsement. 

70.  Indorsement  of  instrument  payable  to  bearer. 

71.  Indorsement    where    payable    to    two    or    more 

persons. 

72.  Effect  of  instrument  drawn  or  indorsed  to  a  person 

as  cashier. 

73.  Indorsement  where  name  is  wrongly  designated 

or  misspelled. 

74.  Indorsement  in  representative  capacity. 

75.  Time  of  indorsement;  presumption. 

76.  Place  of  indorsement;  presumption. 

77.  Continuation  of  negotiable  character. 

78.  Striking  out  indorsement. 

79.  Transfer  without  indorsement;  effect  of. 

80.  When  prior  party  may  negotiate  instrument. 


102  NEGOTIABLE    INSTRUMENTS   LAW 

§  60.  What  constitutes  negotiation.  An  instrument  is 
negotiated  when  it  is  transferred  from  one  person  to  another 
in  such  manner  as  to  constitute  the  transferee  the  holder 
thereof.  If  payable  to  bearer  it  is  negotiated  by  delivery;  if 
payable  to  order  it  is  negotiated  by  the  indorsement  of  the 
holder  completed  by  delivery. 

Meaning  of  Negotiation. — Negotiation  means  the  act  by  which  a  bill 
of  exchange  or  promissory  note  is  put  into  circulation  by  being  passed 
from  one  of  the  original  parties  to  another  person.  If  A  gives  B  a  check 
on  C's  bank  and  B  presents  the  check  at  the  counter  of  C,  no  negotiation 
is  necessary  or  had,  he  simply  demands  and  receives  payment;  but  if  B 
goes  to  D's  store  and  buys  a  bill  of  goods  and  tenders  the  indorsed  check 
in  payment,  he  negotiates  the  check.  When  a  check  is  presented  to  the 
bank  upon  which  it  was  drawn,  and  is  paid  by  such  bank,  such  payment 
discharges  the  instrimient  and  the  bank  is  not  thereafter,  within  the 
meaning  of  the  statute,  "a  holder"  of  such  check. 

Aurora  Bank  v.  Hayes,  etc.,  88  Neb.  190. 


I    SOUTH 
;    TEXAS 
;  COMMERCIAL 
{  NATIONAL  : 
I     BANK     ' 


HOUSTON. rcxAS./^!^i^^-j£- i9l;Z Ho.^<^/f  .. 

SouthTexas  Commercial  National  BANK35  a 


(INDORSED) 

PAY  TO  FIRST  NATIONAL  BANK,  NEW  YORK 

WIZARD  ELECTRIC  CO. 

by  JAMES  L.  SAMPSON 

FIRST  NATIONAL  BANK,  BROOKLYN 

The  indorsement  "Wizard  Electric  Company  by  James  L.  Sampson" 
does  not  indicate  the  character  of  the  Wizard  Electric  Company  as  to 
whether  it  is  a  corporation  or  partnership.  The  indorsement  is,  therefore, 
irregular  and  it  should  be  returned  to  the  indorsers  for  guarantee.  As 
regards  the  indorsement  of  the  First  National  Bank,  which  is  missing,  the 


NEGOTIATION  103 

same  should  be  called  to  the  attention  of  the  bank  presenting  the  same 
for  guarantee,  so  that  it  may  protect  itself.  Of  cotirse,  the  bank  on  which 
the  paper  is  drawn  may  rely  upon  its  rights  of  recourse  against  the  First 
National  Bank,  which  is  the  last  indorser,  without  any  guarantee,  but  the 
proper  course  would  be  to  call  to  the  attention  of  the  last  indorser  the 
irregularity  and  give  it  an  opportunity  to  take  such  measure  for  its  pro- 
tection as  it  may  see  fit. 

Delivery. — To  constitute  a  title  to  a  promissory  note  by  indorsement, 
a  delivery  of  the  note  by  the  indorser  to  the  indorsee,  or  that  which  is 
equivocal  to  such  delivery,  is  necessary.  One  who  indorses  a  note  to  an 
agent,  merely  for  the  purpose  of  enabling  the  latter  to  collect  it  for  the 
former,  may  sustain  a  suit  on  it  in  his  own  name. 

Dann  v.  Norris,  24  Conn.  333;  Scotland  Bank  v.  Hohn,  146  Mo.  699. 

Mere  indorsement  of  the  name  of  the  payee  is  ineffectual  to  pass  the 
title  to  a  note  without  actual  delivery. 

Spencer  v.  Carstarphen,  15  Colo.  445. 

If  a  person  who  indorses  a  bill  or  note  to  another,  whether  for  value 
or  for  the  piurpose  of  collection,  comes  again  into  possession  thereof,  he  is 
to  be  regarded,  unless  the  contrary  appears,  as  the  bona  fide  holder  and 
owner  of  such  bill  or  note,  and  is  entitled  to  recover  thereon  without 
producing  any  receipt,  or  indorsement  back  to  him,  and  he  may  strike 
the  subsequent  indorsements  and  his  own  from  the  bill  or  note,  or  not, 
as  he  may  think  proper. 

Middleton  v.  Griffith,  57  N.  J.  L.  442. 

Where  the  maker  of  a  check  required  the  payee  named  therein  to 
indorse  the  instrument  as  payable  to  the  order  of  the  plaintiff  and  delivered 
the  check  thus  indorsed  to  the  payee  with  instructions  to  deliver  the 
same  to  the  plaintiff,  there  was  a  constructive,  although  no  actual  delivery 
to  the  plaintiff,  so  as  to  vest  him  with  legal  title. 

Wolfin  V.  Security  Bank  of  N.  Y.,  170  App.  Div.  (N.  Y.)  519. 

Parol  evidence  is  inadmissible  to  establish  an  oral  agreement  con- 
temporaneous with  the  making  of  a  negotiable  instrument,  whereby  said 
instrument  was  not  to  be  negotiated. 

Benton  v.  Sikyta,  84  Neb.  808;  See  also,  Wooley  v.  Cobb,  165  Mass. 
503;  Wood  v.  Schaefer,  173  Mass.  443. 

§  6i.  Indorsement;  how  made.  The  indorsement  must 
be  written  on  the  instrument  itself  or  upon  a  paper  attached 
thereto.  The  signature  of  the  indorser,  without  additional 
words,  is  a  sufhcient  indorsement. 


104  NEGOTIABLE    INSTRUMENTS    LAW 

Variant. — The  Illinois  statute  adds  at  the  end  of  the  section  "and 
the  addition  of  words  of  assignment  or  guaranty  shall  not  negative  the 
additional  effect  of  the  signature  as  an  indorsement,  unless  otherwise 
expressly  stated." 


An  indorsement  in  pencil  or  by  mark  is  sufficient.  A  person  may 
become  boimd  by  any  mark  or  designation  he  thinks  proper  to  adopt, 
provided  it  is  used  as  a  substitute  for  his  name,  and  he  intends  to  bind 
himself.  Thus  where  an  indorsement  was  in  lead  pencil  and  in  figiires 
"1,  2,  8,"  no  name  being  written. 

Brown  v.  Butchers'  Bank,  6  Hill  443,  41  Am.  Dec.  735;  Drefahl  v. 
Security  Savings  Bank  (la.)  107  N.  W.  179. 

Where  the  name  of  the  drawee  is  stamped  on  the  back  with  a  rubber 
stamp,  by  one  having  authority  to  do  so,  and  with  intent  to  indorse  it, 
it  is  a  valid  indorsement,  but  does  not  prove  itself  and  must  be  established 
by  proper  testimony. 

Mayers  v.  McRimmon,  140  N.  C.  642;  Homer  v.  Mo.  Pa.  R.  Co., 
70  Mo.  App.  291;  Loughrer  v.  Bonniwell,  125  la.  518;  Herrick  v.  Morrill, 
37  Minn.  250. 

It  has  been  many  times  held  that  affixing  a  rubber  stamp  to  an 
instrument  is  sufficient  in  law  to  fulfill  the  requirement  that  the  indorse- 
ment or  the  name  must  be  written  or  in  writing,  if  the  stamp  is  affixed 
with  the  intent  of  using  it  as  an  indorsement.  For  illustration,  see  Homer 
V.  Missouri  Pac.  Ry.  Co.,  70  Mo.  App.  285,  291.  In  that  case  our  court 
said:  "The  word  'writing,'  in  law,  not  only  means  words  traced  T^dth  a 
pen  or  stamped,  but  printed  or  engraved  or  made  legible  by  any  other 
device,"  citing  Henshaw  v.  Foster,  9  Pick.  (Mass.)  312. 


NEGOTIATION  105 


Fidelity  Trust  Company 

OF    BUFFALO    l^v>    y^/^yCr^     <^  /J- ,  lai    Y 


No.  ^///  r>S^^   xr:^:^^^ 


{INDORSED) 

PAY  TO 

H.  COHEN 

THOS.  A.  KILLIP 

PAY  TO 

WATSON  B.  KENDALL 

H.  COHEN 
COMMERCIAL  BANK 

The  indorsement  'Thomas  A.  Killip"  is  correct,  the  title  Dr.  is  not 
necessary,  although  the  check  should  not  be  cashed  on  account  of  the 
missing  indorsement  of  Watson  B.  Kendall. 

An  indorsement  of  ''all  the  right,  title  and  interest  of  the  payee  of  a 
note"  does  not  in  any  way  affect  its  negotiability,  and  the  indorsee  is 
deemed  prima  facie  to  be  a  holder  in  due  course,  if  he  has  possession  of 
the  note  under  such  indorsement. 

Evans  v.  Freeman,  142  N.  C.  66;  Patent  Title  Co.  v.  Stratton,  89 
Fed.  174;  First  National  Bank  v.  McCullough,  17  L.  R.  A.  1105;  Borden  v. 
Clark,  26  Mich.  61;  Thorp  v.  Mindeman,  123  Wis.  140;  Schmidt  v.  Pegg, 
172  Mich.  163;  Hailey  v.  Falconer,  32  Ala.  536. 

"For  value  received  I  hereby  guarantee  payment  of  the  within  note 
and  waive  demand  and  notice  of  protest"  written  on  the  back  of  a  note 
by  the  payee,  constitutes  a  mere  guaranty  and  not  an  indorsement  in 
due  course. 

Ireland  v.  Floys,  142  Pac.  401. 

The  words  "I  hereby  assign  this  note  over  to  E.  H.  Farnsworth  this, 
the  Nov.  1st,  1910,"  signed  by  the  payee  on  the  back  of  a  negotiable 
promissory  note,  complete  and  regular  on  its  face,  accompanied  by  delivery 
is  an  indorsement  of  the  note. 


106  NEGOTIABLE   INSTRUMENTS   LAW 

Famsworth  v.  Biirdick,  94  Kans.  749. 

The  assignee  of  a  promissory  note  takes  it  subject  to  any  defenses 
or  counterclaim  good  as  against  the  assignor,  at  least  to  the  amount  of 
the  note. 

Smith  V.  Hedges,  89  Misc.  183;  Zabriskie  v.  C.  V.  R.  R.  Co.    131 

N.  Y.  72. 


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C^^'-yTjy  :Z!^A^H<^>a-tz.<yz^y 


M  <--^^^t^  ^^.  ^c^?zAy 


The  assignment  of  the  foregoing  note  without  indorsement  and  on  a 
separate  paper  is  sufficient  to  constitute  the  holder  a  bona  fide  holder  for 
value  so  as  to  cut  ofE  the  defenses  of  the  maker,  and  if  he  had  a  defense 
the  holder  could  not  enforce  payment,  the  holder  standing  in  the  same 
position  as  his  assignors  and  can  assert  only  such  rights  as  he  might  have. 

Central  Trust  Co.  v.  First  National  Bank,  101  U.  S.  58;  Traders 
Bank  v.  Taylor,  100  Mass.  18. 

This  section  applied  as  definition  of  holder  in  due  course. 

Manufacturers'  Commercial  Co.  v.  Blitz,  131  App.  Div.  (N.  Y.)  17. 

The  formal  requisites  of  an  indorsement  are : 

(a)  Though  usually  on  the  back  of  the  instnmient  it  is  valid  on  its 
face,  but  it  must  be  somewhere  upon  it.  When  by  reason  of  rapid  circu- 
lation the  instnmient  becomes  filled  with  indorsements,  the  law  merchant 
permits  the  holder  to  paste  on  a  slip  of  paper  for  his  own  and  subsequent 
indorsements.     This  is  called  an  allonge. 

(b)  Any  form  of  words  with  the  signature  from  which  the  intent  of 
the  holder  to  indorse  may  be  determined  a  sufficient  indorsement.  The 
usual  signature  of  the  indorser  is  the  common  form  of  indorsement. 

See  Subd.  6,  Sec.  36;  Haines  v.  Dubois,  29  N.  J.  L.  259;  Costello  v. 
Crowell,  127  Mass.  293;  Dinsmore  v.  Duncan,  57  N.  Y.  573;  Van  Zandt  v. 
Hopkins,  151  111.  573;  Amot  v.  Symonds,  85  Pa.  St.  99. 


NEGOTIATION  107 


LAUREL.  MISS«^ I9tl. 

85  69  THi  WmWf  ^UTi^H^L  mAUK  35  69 

>,  OF    l_AURE(- 

ORDER  OF  ,'<r>tZ<^t3.t^. 


^^^    -f^^^    -^>d^^^^^.  'y^'^^ _— ^ ^DOLLARS 


(/iVD0i?5££>) 

PAY  TO  AMERICAN  PIPE  CO. 

E.  HOWE,  TREAS. 
AMERICAN  PIPE  COMPANY 

The  question  in  the  above  indorsement  is  as  to  whether  Edward 
G.  Stull  and  E.  Howe  are  Secretary  and  Treasurer  respectively  of  the 
American  Pipe  Company.  If  the  paying  bank  has  knowledge  that  they 
are  both  authorized  officers  of  the  same  company,  it  may  safely  pay  the 
check,  although  on  its  face  the  indorsements  are  irregular.  In  the  absence 
of  such  knowledge  the  check  should  be  returned  for  proper  indorsement. 
The  omission  of  the  margin  figures  is  immaterial. 

The  usual  mode  of  transfer  of  a  promissory  note  is  by  simply  writing 
the  indorser's  name  on  the  back,  or  by  writing  also  over  it  the  direction 
to  pay  the  indorsee  named,  or  order,  or  to  him  or  bearer.  An  indorsement 
may,  however,  be  made  in  more  enlarged  terms,  and  the  indorser  be  held 
liable  as  such.  In  Sands  v.  Wood,  1  Iowa  263,  the  indorsement  was,  "I 
assign  the  within  note  to  Mrs.  Sarah  Coffin."  In  Sears  v.  Lautz,  47 
Iowa  658,  the  indorsement  was,  "I  hereby  assign  all  my  right  and  title  to 
Loms  Meckley."  In  each  case  the  party  so  assigning  was  held  as  indorser. 
The  court  in  the  latter  case  saying,  "He  used  no  words  that  in  and  for 
themselves  indicated  that  he  had  bound  or  made  himself  liable  in  case 
the  maker,  after  demand,  failed  to  pay  the  note.  But  it  was  held  the  law 
as  a  legal  conclusion,  attached  to  the  words  used  the  liability  that  follows 
the  indorsement  of  a  promissory  note." 

See  also,  Shelby  v.  Judd,  24  Kan.  166;  Brotherton  v.  Street,  124  Ind. 
599;  Gale  v.  Mayhew,  125  N.  W.  Rep.  781. 

Where  a  note  was  indorsed  "For  value  received  I  transfer  to  A  all 
my  right,  title  and  interest  in  the  within  note,  to  be  enjoyed  in  the  same 


108  NEGOTIABLE   INSTRUMENTS   LAW 

manner  as  may  have  been  by  me,"  it  was  held,  that  such  indorsement 
exempted  the  indorser  from  personal  liability  on  the  note. 

Hailey  v.  Falconer,  32  Ala.  536;  Aniba  v.  Yeomans,  39  Mich.  171; 
Fassin  v.  Hubbard,  55  N.  Y.  465. 

Indorsement  by  guaranty 


nn"-^ 


^  CP^^  r^jj^^y  .  yt^^       >C?.c^  ^-y^r^^ 


-^^~y^,'C/C/' 


^ ^^ J>/f-£^  /-^  (^.^(zCr-^ 


{INDORSED) 

WILLIAM  B.  SMITH 

For  value  received  i  hereby  guarantee  the  payment  of  the 
within  note  to  any  holder  thereof,  together  with  any  costs  and 

expenses  INCURRED  IN  THE  COLLECTION  OF  THE  AMOUNT  THEREOF  FROM 
THE  MAKER,  INDORSEE,  MYSELF  OR  EITHER  OR  ALL  OF  US. 

JOHN  DOE 

A  surety  is  not  entitled  to  a  notice  of  dishonor. 

Manufacturing  Co.  v.  Kimmel,  87  Ind.  566;  Ballard  v.  Burton,  16 
L.  R.  A.  667;  Dan.  Neg.  Int.  Sec.  1753;  Coleman  v.  Fuller,  105  N.  C.  328; 
Hall  V.  Weaver,  34  Fed.  Rep.  104;  Kitton  v.  Tool  Co.,  22  R.  I.  611. 

The  words  "For  value  received  I  hereby  guarantee  payment  of  the 
within  note  and  waive  demand  and  notice  of  protest  on  same  when  due," 
written  on  the  back  of  the  note  by  the  payee,  do  not  constitute  an  indorse- 
ment and  transfer  in  due  course,  but  constitute  a  mere  guarantee  of  pay- 
ment. And  the  maker  of  such  note  is  entitled  to  make  the  same  defenses 
against  same  in  the  hands  of  the  holder  under  such  guaranty  that  he 
would  be  entitled  to  make  if  it  were  in  the  hands  of  the  original  payee. 

Ireland  v.  Floyd,  42  Oakl.  609;  Swenson  v.  Stoltz,  36  Was.  318; 
Hall  V.  Toby,  .110  Pa.  St.  318;  Thorp  v.  Mindeman,  123  Wis.  150. 

§  62.  Indorsement  must  be  of  entire  instrument.     The 

indorsement  must  be  an  indorsement  of  the  entire  instrument. 
An  indorsement,  which  purports  to  transfer  to  the  indorsee  a 


NEGOTIATION  109 

part  only  of  the  amount  payable,  or  which  purports  to  trans- 
fer the  instrument  to  two  or  more  indorsees  severally,  does 
not  operate  as  a  negotiation  of  the  instrument.  But  where 
the  instnunent  has  been  paid  in  part,  it  may  be  indorsed  as 
to  the  residue. 

Where  an  executor  accepts  a  promissory  note  in  payment  for  property 
belonging  to  testator  and  thereafter  assigns  one-fifth  of  such  promissory 
note  to  each  of  the  five  beneficiaries  of  the  estate  and  he,  himself,  retains 
possession  of  the  note,  each  of  the  five  beneficiaries  is  not  entitled  to 
maintain  a  separate  action  against  the  maker  to  recover  the  one-fifth 
part  thereof  assigned  to  him,  as  the  obligation  is  single  and  cannot  be 
divided  into  parts. 

King  V.  King,  73  App.  Div.  (N.  Y.)  547. 

'A  complaint  which  alleges  that  defendant  made  a  promissory  note 
on  a  certain  date,  and  that  the  payees  thereafter  and  before  maturity  of 
said  note  indorsed  a  one-half  interest  therein  and  delivered  the  same  to 
plaintiff,  who  is  now  the  owner  and  holder  thereof,  fails  to  state  a  cause 
of  action. 

Barkley  v.  Muller,  164  App.  Div.  (N.  Y.)  351. 

A  negotiable  promissory  note,  dated  July  8,  and  signed  by  fifteen 
persons,  had  indorsements  on  it  of  partial  payments  dated  July  11,  by 
the  signers.  The  note  was  finally  delivered  on  July  13.  Held,  the 
indorsements  did  not  destroy  the  negotiability  of  the  note,  inasmuch  as 
the  amount  due,  although  not  expressly  stated,  could  be  ascertained  with 
mathematical  certainty. 

Smith  V.  Shippey,  182  Pa.  St.  24. 

Notes  cannot  be  apportioned  by  assignment.  Were  the  law  other- 
wise, the  holder  of  a  promissory  note  might  greatly  oppress  the  payee 
by  making  numerous  assignments  of  parts  of  the  note,  and  thus  multiply 
suits,  if  the  same  were  not  paid  at  matiuity. 

Lindsay  v.  Price,  Z?>  Texas  282. 

§  63.  Kinds  of  indorsement.  An  indorsement  may  be 
either  special  or  in  blank ;  and  it  may  also  be  either  restrictive 
or  qualified,  or  conditional. 

An  indorsement  in  blank  means  that  the  instrument  is  to  be  paid 
to  the  person  who  may  hold  it.  These  may  be  successive  indorsements 
in  blank. 

The  indorsee  in  blank,  or  any  subsequent  bona  fide  holder,  may 
write  over  an  indorsement  in  blank  any  contract  consistent  with  the 
character  of  the  indorsement.     Sec.  65. 


110  NEGOTIABLE   INSTRUMENTS   LAW 

There  is  no  difference  between  a  note  indorsed  in  blank  and  one 
payable  to  bearer  and  is  deemed  to  be  treated  as  so  much  cash,  unless 
the  payee  chooses  by  a  specific  indorsement  to  some  person  to  restrain 
its  currency. 


c^/-r.yyiy 


y7J>     cJx€^.^/uA^.    y<5,;2^?2Jy 


This  note  payable  to  order  is  the  sole  property  of  Brewster  until 
indorsed  by  him.  If  it  is  lost  or  stolen  and  paid  by  the  maker  without 
Brewster's  indorsement,  the  maker  will  continue  to  be  liable  for  the 
amotmt.    When  Brewster  indorses  his  name  on  the  back 

{INDORSEMENT  IN  BLANK) 
HENRY  C.  BREWSTER 

the  note  would  then  be  indorsed  in  blank  and  is  then  payable  to  bearer 
and  should  it  be  negotiated  further,  Brewster  would  be  liable  to  such 
subsequent  holder  if  the  note  was  duly  protested  for  non-payment  and 
Brewster  received  notice  thereof.  The  note  being  payable  to  "order" 
Brewster  could  negotiate  the  note  away.  If  Brewster  should  indorse 
PAY  TO  PETER  VAY  OR  ORDER 
HENRY  C.  BREWSTER 
would  mean  an  indorsement  in  full  and  could  not  again  be  further  nego- 
tiated without  the  signature  of  Vay.     Should  Vay  indorse 

{QUALIFIED  INDORSEMENT) 

WITHOUT  RECOURSE 

PETER  VAY 

such  indorsement  does  not  impair  the  negotiable  character  of  the  bill. 

{CONDITIONAL  INDORSEMENT) 
Pay  James  L.  Hotchkiss  or  order  on  the  completion  of  the  Le  Roy 

branch  B.  R.  &  P.  R.  R. 

JOHN  F.  DINKEY 

The  maker  of  the  note  can  pay  if  he  choose,  whether  the  condition 
has  been  fulfilled  or  not. 


NEGOTIATION  111 

{RESTRICTIVE  INDORSEMENT) 

Pay  Fred  ZoUer  or  order  for  collection  for  my  account 

C.  C.  DAVY 

The  last  two  indorsements  destroy  the  further  negotiation  of  the 
note  as  a  negotiable  instrument. 

§  64.  Special  indorsement;   indorsement  in  blank.     A 

special  indorsement  specifies  the  person  to  whom,  or  to  whose 
order  the  instriiment  is  to  be  payable ;  and  the  indorsement  of 
such  indorsee  is  necessary  to  the  further  negotiation  of  the 
instrument.  An  indorsement  in  blank  specifies  no  indorsee, 
and  an  instrimient  so  indorsed  is  payable  to  bearer,  and  may 
be  negotiated  by  delivery. 

Variant. — The  Massachusetts  statute  substitutes  the  words  "does 
not  specify  any  indorsee"  for  "specifies  no  indorsee."  The  Wyoming 
statute  adds  the  word  "made"  between  "be"  and  "payable,"  second  line. 


The  legal  effect  of  a  blank  indorsement  on  a  promissory  note  cannot 
be  varied  by  parol  evidence. 

Torbert  v.  Montague,  38  Colo.  325;  See,  Zimmer  v.  Cheu,  34  App. 
Div.  (N.  Y.)  505. 

Where  notes  are  indorsed  in  blank  to  an  agent,  for  a  particular  pur- 
pose, which  has  been  disregarded  by  him,  the  principal  will  be  bound  to  a 
bona  fide  holder  by  reason  of  the  general  authority  implied  in  the  blank, 
and  cannot  against  such  holder,  avail  himself  of  the  fact  that  the  agent 
exceeded  his  authority. 

Wedge  Co.  v.  Denver  Bank,  19  Cola.  App.  188. 

The  indorsement  of  a  note  in  blank  by  the  payee  and  its  production 
by  the  plaintiff  in  an  action  thereon  are  prima  facie  evidence  of  the  latter's 
ownership  of  it  and  the  existence  of  subsequent  indorsements,  does  not 
effect  the  presumption,  especially  where  they  were  cancelled. 

Zimmer  v.  Cheu,  34  App.  Div.  (N.  Y.)  505;  4  Am.  &  Eng.  Ency.  of 
Law  (2nd  ed.)  318  and  cases  cited. 

A  check  upon  its  face  is  made  payable  to  F.  M.  Rounds  and  is  indorsed 

by  Rounds  in  these  words,  "Pay  to  the  order  of 

with  his  signature  written  immediately  below."  This  amounts  to  an 
indorsement  in  blank,  rendering  the  instnmient  payable  to  bearer  and 
negotiable  by  delivery. 

State  V.  Hinton,  109  Pac.  26. 


112  NEGOTIABLE    INSTKUMENTS    LAW 

Where  A,  the  holder  of  a  check,  indorsed  it  in  blank,  and  delivered 
it  to  B  for  deposit  to  A's  account,  the  drawee  bank  was  protected  in  paying 
the  check  in  good  faith  to  B.  Peerot  v.  Mt.  Morris  Bank,  120  N.  Y.  App. 
Div.  241,  104  N.  Y.  Supp.  1045. 

Where  one  indorses  a  note  in  blank,  he  warrants  to  all  subsequent 
holders  in  due  course  that  he  will  pay  the  note  to  the  holder  on  receiving 
due  notice  that  the  maker,  upon  demand  at  the  proper  time,  neglected  to 
pay  it,  and  if  the  maker  has  become  the  holder  also,  he  cannot  by  present- 
ment and  notice  of  refusal  recover  on  the  indorsement. 

Abramonitz  v.  Abramonitz,  113  N.  Y.  Supp.  798. 

§  65.  Blank  indorsement;  how  changed  to  special  in- 
dorsement. The  holder  may  convert  a  blank  indorsement 
into  a  special  indorsement  by  writing  over  the  signature  of  the 
indorser  in  blank  any  contract  consistent  with  the  character 
of  the  indorsement . 

The  holder  of  a  note  indorsed  in  blank  by  the  payee  has  no  right  to 
change  the  contract  of  the  indorser  by  writing  over  the  name  of  the 
indorser  a  contract  of  guaranty  without  the  knowledge  or  consent  of  the 
indorser. 

Belden  v.  Hann,  61  Iowa  44. 

In  an  action  on  a  note  indorsed  in  blank  and  negotiated  by  delivery, 
it  was  no  defense  that  it  was  not  indorsed  by  the  party  from  whom  plain- 
tiff purchased  it. 

Dominion  Trust  Co.  v.  Hildner,  243  Pa.  253,  90  Atl.  69. 

§  66.  When  indorsement  restrictive.  An  indorsement 
is  restrictive,  which  either: 

1 .  Prohibits  the  further  negotiation  of  the  instrument ;  or 

2.  Constitutes  the  indorsee  the  agent  of  the  indorser;  or 

3.  Vests  the  title  in  the  indorsee  in  trust  for  or  to  the  use 
of  some  other  person. 

But  the  mere  absence  of  words  implying  power  to 
negotiate  does  not  make  an  indorsement  restrictive. 

Examples  of  restrictive  indorsement.  'Tay  to  A  only,"  'Tay  to  A 
for  my  use,"  "The  within  must  be  credited  to  A,"  "Credit  my  account," 
"For  collection  and  return." 

Subd.  I. — A  note  indorsed  "Pay  the  within  to  A.  Thatcher"  with 
the  omission  of  the  words  "or  order"  does  not  restrict  further  negotiation. 
Leavitt  v.  Putnam,  3  N.  Y.  496. 


NEGOTIATION  113 

In  Edie  v.  East  India  Co.,  2  Burr  1221,  the  examples  of  restrictive 
indorsements  put  by  the  way  of  example  are,  "Pay  to  my  steward  and  no 
other  person  for  my  use."  This  shows  there  was  no  intention  to  pass 
title;  and  the  same  effect  has  been  given  to  an  indorsement,  "Pay  to  P 
only."  It  was  held  that  these  words  indicated  that  the  indorsee  was 
agent  only. 

Power  V.  Finnic,  4  Call.  (Va.)  411;  "Pay  S  or  order  for  account 
Merchants'  National  Bank;"  White  v.  Miners'  National  Bank,  102  U.  S. 
658. 

Subd.  2. — The  general  trend  of  decisions  hold  that  an  indorsement 
for  collection  or  deposit  constitutes  a  retention  of  title  in  the  absence  of 
any  agreement  to  the  contrary,  and  the  owner  may  control  such  paper 
unless  paid. 

Freemans'  Bank  v.  National  Tube  Co.,  151  Mass.  413;  21  Am.  St. 
Rep.  461. 

An  indorsement  in  blank  accompanied  by  a  letter  stating  that  the 
inclosed  draft  was  for  "collection  and  credit"  must  be  read  together,  and 
the  effect  is  to  make  the  indorsement  restrictive  and  the  same  in  character 
as  if  the  contents  of  the  letter  had  been  incorporated  in  the  indorsement. 

Bank  of  America  v.  Waydell,  187  N.  Y.  120. 

Plaintiffs  were  owners  of  certain  sight  drafts  drawn  on  the  defendants 
by  P,  who  was  plaintiff's  confidential  clerk  and  had  authority  to  receive 
payment  for  them  in  the  course  of  their  business,  indorsed  them  "For 
deposit  in  Broadway  National  Bank."  A  messenger  boy  in  plaintiff's 
employ,  who  had  been  directed  by  them  to  obey  the  orders  of  P,  by  his 
directions  took  the  drafts  to  defendant's  office  and  received  payment  in 
money,  which  he  paid  over  to  P,  who  misappropriated  it.  In  an  action 
for  alleged  conversion  held,  that  the  indorsement  did  not  confer  apparent 
authority  upon  the  boy  to  receive  payment,  but  as  P  had  such  authority, 
the  delivery  of  the  money  to  him  was  a  valid  payment  to  plaintiff. 

Johnson  v.  Donnell,  90  N.  Y.  1. 

An  indorsement  for  collection  is  not  a  transfer  of  the  title  to  the 
indorsee,  but  merely  constitutes  him  the  agent  of  the  indorser  to  present 
the  paper,  demand  and  receive  payment  and  remit  the  proceeds. 

National  Butchers,  etc..  Bank  v.  Hubbell,  117  N.  Y.  384. 

When  a  bank  to  which  a  draft,  appearing  on  its  face  to  be  negotiable, 
is  forwarded  by  another  bank,  purchases  it  for  value,  without  notice  of 
the  agreement  restricting  negotiation,  the  drawer  may  not  stop  payment 
of  the  draft  against  the  rights  of  the  bank  so  holding  the  paper. 

Bank  v.  Oil  Mills,  150  N.  C.  719. 


114  NEGOTIABLE   INSTRUMENTS   LAW 

Indorsement  for  collection  and  deposit,  see,  N.  W.  National  Bank  v. 
Bank  of  Commerce,  107  Mo.  402;  Cecil  Bank  v.  Farmers'  Bank,  22  Md. 
148;  Blaine  v.  Bourne,  11  R.  I.  119;  Armstrong  v.  National  Bank,  90  Ky. 
431;  Ditch  v.  Western  National  Bank,  79  Md.  192;  Smith  v.  Bayer,  46 
Or.  143;  Commercial  National  Bank  v.  Armstrong,  148  U.  S.  50;  Beal  v. 
Somerville,  50  Fed.  647;  Haskell  v.  Avery,  181  Mass.  106. 

Subd.  3. — Restrictive  indorsements  are  held  to  negative  the  pre- 
sumption of  a  consideration,  on  such  as  indicate  that  they  are  not  intended 
to  pass  title,  but  merely  to  enable  the  indorsee  to  collect  for  the  benefit 
of  the  indorser.  An  indorsement  "Pay  to  the  order  of  Mrs.  Mary  Hock 
for  the  benefit  of  her  son  Charlie,"  imparted  consideration,  and  in  effect 
was  simply  to  give  notice  of  the  interest  of  the  beneficiary  named,  and 
protect  him  against  misappropriation. 

Hock  V.  Pratt,  78  N.  Y.  375. 

§  67.  Effect  of  restrictive  indorsement;  rights  of  indor- 
see. A  restrictive  indorsement  confers  upon  the  indorsee  the 
right: 

1.  To  receive  payment  of  the  instnmient; 

2.  To  bring  any  action  thereon  that  the  indorser  could 
bring; 

3.  To  transfer  his  rights  as  such  indorsee,  where  the  form 
of  the  indorsement  authorizes  him  to  do  so. 

But  all  subsequent  indorsees  acquire  only  the  title  of  the 
first  indorsee  under  the  restrictive  indorsement. 

Variant. — The  Illinois  statute  adds  to  subdivision  "or  except  in  the 
case  of  a  restrictive  indorsement  specified  in  Section  36 — Sub-section  2 — 
any  action  against  the  indorser  or  any  prior  party  that  a  special  indorsee 
would  be  entitled  to  bring,"  and  eliminates  the  words  "his  rights  as  such 
indorsee"  in  Subdivision  3  and  substitutes  therefor  "the  instnmient" 
and  adds  at  the  end  of  Subdivision  3  the  clause  "specified  in  Section  36 — 
Sub-section  1 — and  as  against  the  principal  or  cestui  que  trust  only  the 
title  of  the  first  indorsee  imder  the  restrictive  indorsement  specified  in 
Section  36 — Sub-sections  2  and  3  respectively." 


Where  a  promissory  note  was  indorsed  by  the  payee  to  another  "for 
collection"  for  the  account  of  the  payee,  the  indorsee  had  such  a  legal 
title  as  would  authorize  him  to  bring  a  suit  in  his  own  name.  Wilson  v. 
Tolson,  79  Ga.  137,  but  in  such  case  he  will  hold  the  note  subject  to  the 
same  defenses  that  could  have  been  made  to  it  in  the  hands  of  the  original 
payee. 


NEGOTIATION  115 

Roberts  v.  Parrish,  17  Or.  583;  Craig  v.  Palo  Stock  Farm,  16  Idaho 
701. 

SEE  ALSO,  Hook  v.  Pratt,  78  N.  Y.  376;  Freeman's  Bank  v.  National 
Tuve  Works,  151  Mass.  417;  Regina  Flour  Mills  v.  Holmes,  156  Mass.  11; 
Spofford  V.  Norton,  126  Mass.  533;  Cummings  v.  Kohn,  12  Mo.  App.  585; 
Ward  V.  Tyler,  52  Pa.  St.  393;  Schmidt  v.  Pego,  172  Mich.  161;  Metzger  v. 
Sigall,  ^3  Wash.  80. 

§  68.  Qualified  indorsement.  A  qualified  indorsement 
constitutes  the  indorser  a  mere  assignor  of  the  title  to  the  in- 
strument. It  may  be  made  by  adding  to  the  indorser's  sig- 
nature the  words  "without  recourse"  or  any  words  of  similar 
import.  Such  an  indorsement  does  not  impair  the  negotiable 
character  of  the  instrument. 

The  words  "without  recourse"  accompanying  an  indorsement  clearly 
indicate  that  the  person  making  the  transfer  does  not  intend  to  assume  the 
position  of  an  imconditional  indorser,  or  to  incvir  any  liability  if  the  note 
is  not  paid  at  maturity  upon  due  demand,  or  even  if  all  the  parties  to  the 
paper  should  prove  to  be  wholly  insolvent.  Such  indorsement  effects  a 
transfer  of  the  title  of  the  paper  without  imposing  the  liability  of  indorser. 
While  he  is  thus  not  liable  on  the  paper,  yet  certain  liabilities  are  deemed 
to  flow  from  the  contract  of  sale  on  the  principle  that  where  personal 
property  of  any  kind  is  sold,  there  is  on  the  part  of  the  vendoe  an  implied 
warranty  that  he  has  title  to  it  and  that  it  is  what  it  purports  to  be. 

3  R.  C.  L.  1166;  Drennan  v.  Dunn,  124  111.  175. 


(J^J^y  ;7^;^^/^^      -^W^.. 


u 


{INDORSED) 

WITHOUT  RECOURSE 
EUGENE  STEPHENSON 

By  the  foregoing  indorsement  Eugene  Stephenson  guarantees  that 
the  signature  of  the  maker  is  genuine;  that  the  note  is  valid  between  the 


116  NEGOTIABLE   INSTRUMENTS    LAW 

original  parties;  that  the  makers  were  competent  to  contract;  that  the 
amount  expressed  therein  is  due  and  that  there  was  no  illegality  in  its 
inception.     To  avoid  such  guarantees  it  should  be  indorsed. 

Without  recourse  and  without  expressly  or  impliedly  war- 
ranting ANY  OF  THE  MATTERS  CONTAINED  IN  OR  WHICH  GO  TO  THE  MAKING 
UP    OF    THIS    INSTRUMENT. 

An  indorsement  without  recourse  is  usually  accompanied  by  the 
words,  "without  recourse,"  "at  the  indorsee's  risk,"  "sans  recourse," 
"to  be  enjoyed  in  the  same  manner  as  may  have  been  by  me,"  "without 
warranty,"  etc.,  etc.,  and  means  that  the  indorsee  exempts  himself  from 
liability  to  indemnify  the  holder  upon  the  dishonor  of  the  bill  or  note. 

To  relieve  one  who  indorses  paper  from  liability  on  his  indorsement, 
he  must  insert  in  the  instrument  itself  words  clearly  expressing  such  an 
intention. 

Fassin  v.  Hubbard,  55  N.  Y.  465;  Hailey  v.  Falconer,  32  Ala.  536; 
Schmidt  v.  Pegg,  172  Mich.  160;  Craft  v.  Fleming,  46  Pa.  St.  140. 

The  indorsement  of  a  negotiable  instnmient  "without  recourse"  is 
not  sufficient  to  put  the  purchaser  upon  notice,  and  it  does  not  impair 
the  negotiable  character  of  the  instrument. 

Banking  Co.  v.  Hall,  119  Tenn.  548. 

While  an  indorsement  "without  recourse"  relieves  the  indorser  of 
liability  as  a  party  to  a  bill  or  note,  it  does  not  relieve  him  if  the  instnmient 
is  not  genuine  or  if  he  had  no  title  to  it,  or  if  any  prior  party  was  incom- 
petent. 

Bell  v.  Dagg,  60  N.  Y.  528. 

The  purpose  of  an  indorsement  without  recourse  is  to  transfer  the 
title  of  an  instnmient  without  creating  any  personal  liability  on  the  part 
of  the  indorser. 

Goolrich  v.  Wallace,  157  S.  W.  (Ky.)  920. 

The  indorsee  of  a  note  without  recourse  impliedly  warrants  that  the 
signatures  of  prior  parties  whose  names  appear  thereon  are  genuine. 

State  V.  Bank,  139  la.  338;  Ware  v.  McCormick,  96  Ky.  139;  28 
S.  W.  157. 

He  also  impliedly  warrants  that  he  has  title  to  the  paper  which  gives 
him  the  right  to  sell  it,  but  he  does  not  warrant  the  solvency  of  maker. 
Hecht  v.  Batcheller,  147  Mass.  335;  Challis  v.  McCrum,  22  Kan.  157. 

An  indorsement  "without  recourse"  in  the  absence  of  fraud  releases 
the  indorser  from  liability. 

Cross  V.  Hollister,  47  Kan.  652. 


NEGOTIATION  11 7 

An  indorser  "without  recourse"  of  a  note  partially  void  for  usury, 
is  liable  upon  the  implied  warranty  that  the  note  is  valid  for  the  amount 
expressed  upon  its  face. 

Challis  V.  McCrum,  22  Kan.  157;  Meyer  v.  Richards,  163  U.  S.  385. 

Hannum  v.  Richardson,  48  Vt.  508,  where  an  indorser  sold  a  nego- 
tiable promissory  note  without  recourse.  The  note  was  void  because 
given  for  intoxicating  liquors  in  violation  of  law.  It  was  claimed  that 
the  defendant  knew  of  the  invalidity  of  the  note  when  he  transferred 
it.  The  court  held  that  knowledge  on  the  part  of  the  seller  was  not 
necessary  to  fix  his  liability,  saying:  "By  indorsing  the  note  'without 
recourse'  the  defendant  refused  to  assume  the  responsibility  and  the 
liability  which  the  law  attaches  to  an  unqualified  indorsement,  so  that 
in  respect  to  such  liability  it  was  perhaps  to  be  regarded  as  standing 
without  an  indorsement.  If  it  be  so  regarded,  then  in  what  position  do 
these  parties  stand  in  respect  to  the  transaction?  The  principle  is  well 
settled  that  where  personal  property  of  any  kind  is  sold  there  is  on  the 
part  of  the  seller  an  implied  warranty  that  he  has  title  to  the  property 
and  that  it  is  what  it  purports  to  be  and  is  that  for  which  it  was  sold,  as 
understood  by  the  parties  at  the  time;  and  in  such  case,  knowledge  on 
the  part  of  the  seller  is  not  necessary  to  his  liability.  The  note  in  question 
was  not  a  note.  It  was  not  what  it  piirported  to  be,  or  what  it  was  sold 
and  purchased  for.  It  was  of  no  more  effect  than  if  it  had  been  a  blank 
piece  of  paper  for  which  the  plaintiff  had  paid  his  $50.  In  this  view  of 
the  case,  we  think  the  defendant  is  liable  upon  the  warranty  that  the 
thing  sold  was  a  valid  note  of  hand." 

See  also,  Drennan  v.  Bunn,  124  111.  175. 

The  words  "without  recourse"  need  not  precede  the  signature  of  the 
indorser.  Where  the  payee  of  a  note  indorses  his  name  at  the  right  and 
opposite  the  words  "without  recourse"  the  words  cannot  be  taken  advan- 
tage of  by  subsequent  indorsers. 


m/C^iw/p^mm^^Ji^J^^  26-51 


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U^ 


118  NEGOTIABLE   INSTKUMENTS   LAW 

{INDORSED) 

PAY  TO  THE  ORDER  OF  SECURITY  TRUST  CO. 

FRANK  E.  MAY 

PAY  TO  THE  ORDER  OF  FIRST  NATIONAL  BANK,  N.  Y. 

SECURITY  TRUST  CO.     WITHOUT  RECOURSE 

FIRST  NATIONAL  BANK,  N.  Y. 

The  only  peculiarity  about  the  above  check  is  the  indorsement  of 
the  Security  Trust  Company,  without  recourse.  In  view  of  the  fact 
that  the  First  National  Bank,  a  responsible  institution,  has  seen  fit  to 
indorse  it,  the  check  should  be  paid,  as  the  words  "without  recourse" 
added  to  the  indorsement  of  the  Security  Trust  Company  would  not 
relieve  the  First  National  Bank  or  Frank  E.  May  of  responsibility. 

A  qualified  indorsement  may  be  made  by  adding  to  the  indorser's 
signature  the  words  "without  recourse"  and  a  transfer  by  indorsement 
of  the  "right  and  title"  of  the  payee  or  an  indorser  to  a  negotiable  instru- 
ment is  equivalent  to  an  indorsement  "without  recourse." 

1  Dan.  Neg.  Inst.  Sec.  700  and  700a;  Borden  v.  Clark,  26  Mich.  410; 
Evans  v.  Freeman,  142  N.  C.  66;  Thorp  v.  Mindeman,  123  Wis.  151. 

Parol  evidence. — Where  a  note  is  endorsed  by  two  persons  and  the 
words  "without  recourse"  are  added  to  such  indorsement  and  occupy 
such  position  with  reference  thereto  that  ambiguity  arises  as  to  which 
of  said  indorsements  they  are  intended  to  apply,  parol  evidence  is  admissi- 
ble to  show  to  which  indorsement  such  words  are  applicable. 

Goolrick  V.  Wallace,  154  Ky.  596;  Doll  v.  Gotzchmann,  26  Am.  & 
Eng.  Ann.  cases  880;  Rice  v.  Stearns,  3  Mass.  225;  Pres.  Fitchburg  Bank  v. 
Greenwood,  84  Mass.  434;  Corbett  v.  Fetzer,  47  Neb.  273;  Merchants 
Bank  v.  Vranson,  165  N.  C.  344. 

§  69.  Conditional  indorsement.  Where  an  indorsement 
is  conditional,  a  party  required  to  pay  the  instrument  may  dis- 
regard the  condition,  and  make  payment  to  the  indorsee  or 
his  transferee,  v^hether  the  condition  has  been  fulfilled  or  not. 
But  any  person  to  whom  an  instrument  so  indorsed  is  nego- 
tiated, will  hold  the  same,  or  the  proceeds  thereof,  subject  to 
the  rights  of  the  person  indorsing  conditionally. 

An  example  of  conditional  indorsement  may  be  found  in  the  case  of 
Robertson  v.  Kensington,  4  Taunt  30,  where  the  indorsement  on  the 
draft  was  "Pay  the  within  sum  to  Messrs.  C.  and  R.,  or  order  upon  my 
name  appearing  in  the  Gazette  as  ensign  in  any  regiment  in  the  line, 
within  two  months  from  date."  The  court  held  the  indorsement  was 
conditional  and  a  payment  to  the  subsequent  indorsers  was  at  the  peril 


NEGOTIATION"  119 

of  the  persons  paying,  in  case  the  conditions  were  not  fulfilled.     In  other 
words  the  conditional  indorsement  did  not  absolutely  transfer  the  title. 
This  section  therefore  changes  the  law  in  this  respect. 
See  also,  Dan,  Neg.  Inst.  697. 

§  70.  Indorsement    of   instrument   payable    to    bearer. 

Where  an  instrument,  payable  to  bearer,  is  indorsed  specially, 
it  may  nevertheless  be  further  negotiated  by  delivery ;  but  the 
person  indorsing  specially  is  liable  as  indorser  to  only  such 
holders  as  make  title  through  his  indorsement. 

Variant. — The  Illinois  statute  substitutes  for  "payable  to  bearer" 
the  words  "originally  payable  to  or  indorsed  specially  to  bearer." 


Where  a  bill  of  exchange  or  draft  accepted  was  indorsed  by  the  payee 
in  blank  and  was  by  the  next  holder  indorsed  specially.  Held,  that  the 
first  indorsement  being  in  blank,  the  bill  was  afterwards  transferable  by 
mere  delivery,  and  that  a  holder  by  delivery  may  strike  out  the  special 
indorsement  and  in  a  suit  against  the  acceptors  may  declare  and  recover, 
as  the  indorsee  of  the  payee. 

Mitchell  V.  Fuller,  15  Pa.  St.  268. 

A  check  payable  to  a  certain  person  or  bearer  need  not  be  indorsed, 
nor  the  holder  thereof  be  identified,  and  a  bank  paying  such  check  without 
identification  of  the  holder  is  not  negligent. 

Farmers'  Bank  v.  Bank  of  Rutherford,  115  Tenn.  64;  Phoenix  National 
Bank  v.  Saucier,  59  So.  Rep.  91. 


Genesee  Valley  Trust  Company 


^^^--^^  Jv^'^jt .  - 


120 


NEGOTIABLE   INSTRUMENTS   LAW 


(INDORSED) 

GEORGE  VAN  ALSTYNE 

PAY  TO  THE  ORDER  OF 

JOHN  DOE 

RICHARD   ROE 

LINCOLN  STATE  BANK 

This  check  when  deHvered  was  payable  to  bearer  and  did  not  require 

indorsement  and  wotdd  be  good  in  the  hands  of  any  person  personally 

presenting  it,  and  could  be  cashed  without  indorsement.     Richard  Roe 

by  his   indorsement   converted  it  into  an  order  check,  and  a  cautious 

banker  would  require  the  indorsement  of  John  Doe,  which  is  missing. 

A  bill  or  note  payable  to  order  and  indorsed  in  blank,  so  long  as  the 
indorsement  continues  blank  is  in  effect  payable  to  bearer. 

Dan.  Neg.  Inst.  Sec.  668-696;  Greneaux  v.  Wheeler,  6  Texas  522; 
Ross  V.  Smith,  19  Texas  172;  Rule  v.  Bailey,  16  La.  213;  Little  v.  O'Brien, 
9  Mass.  423;  Johnson  v.  Mitchell,  32  Am.  Rep.  602;  Dugan  v.  United 
States,  3  Wheat.  172;  See  notes  Sec.  66. 

§  71.  Indorsement  where  payable  to  two  or  more  per- 
sons. Where  an  instrument  is  payable  to  the  order  of  two  or 
more  payees  or  indorsees  who  are  not  partners,  all  must 
indorse,  unless  the  one  indorsing  has  authority  to  indorse  for 
the  others. 

Variant. — The  Wisconsin  statute  inserts  the  word  "joint"  before 
"indorsees." 


^"ir^TTTT 


^ 


■i:.u 


Liiiijllili;., 


'<;'''^*'v^i. ;'•'•::.,.  I      .  WASHINGTON     B  R  ANC  H- <   ■^' .        ■'-        'j  \'t.! 


!':,ni;i 


to- 


^-^^^^«^.     CX^JLA-t,^A^>- 


(INDORSED) 

CHARLES  F.  ALLEN 

AARON  C.  ALLEN 

By  CHARLES  F.  ALLEN 

Commercial  paper,  payable  to  two  or  more  persons  who  are  not 
co-partners,  must  be  indorsed  by  all  the  payees  in  order  to  give  good 


NEGOTIATION  121 

title  to  the  indorsee.  Checks  representing  installments  of  the  purchase 
price  of  lands  owned  by  Charles  F.  Allen  and  Aaron  C.  Allen,  two  brothers, 
as  tenants  in  common,  made  payable  to  both  of  such  brothers,  were 
mailed  to  Charles  F.  Allen,  who  indorsed  both  his  own  and  his  brother's 
names  upon  the  checks  and  deposited  them  in  a  bank  to  his  own  individual 
credit.  The  brothers  were  not  co-partners  and  Aaron  C.  Allen  had  not 
given  to  Charles  F.  Allen  express  authority  to  indorse  his  name  on  the 
checks.  It  appeared,  however,  that  Aaron  C.  Allen  had  committed  the 
entire  details  of  the  sale  of  the  land  and  of  the  receipt  of  the  purchase 
to  Charles  F.  Allen;  that  he  knew  that  installments  of  the  piu-chase  price 
had  been  paid  from  time  to  time;  that  he  did  not  attack  his  brother's 
dealings  with  the  checks  until  after  the  latter 's  death  and  until  over  four 
years  after  the  last  check  was  paid.  Held,  that  a  jury  might  properly 
find  that  the  unauthorized  act  of  Charles  F.  Allen  in  indorsing  his  brother's 
name  upon  the  checks  had  been  ratified  by  the  latter. 

Allen  V.  Corn  Exchange  Bank,  87  App.  Div.  N.  Y.  335. 

In  Willis  V.  Green,  5  Hill  233,  the  court  said,  "It  is  a  settled  rule 
that  co-payees,  not  partners,  must  each  indorse  in  order  to  negotiate  the 
paper."  In  Foster  v.  Hill,  36  N.  H.  526,  it  was  held,  where  a  promissory 
note  is  made  payable  to  two  joint  payees,  their  joint  indorsement  is 
necessary  to  negotiate  it.  In  Bennett  v.  McGaughy,  4  Miss.  192,  it  is 
well  settled  that  where  a  note  is  payable  to  two  it  must  be  indorsed  by 
both.  In  Wood  v.  Wood,  16  N.  J.  L.  428,  it  was  held,  that  one  joint 
payee  of  a  promissory  note  cannot  indorse  it,  either  in  his  own  name 
alone  or  in  his  own  name  and  that  of  his  co-payee.  In  Smith  v.  Whiting, 
9  Mass.  334,  it  was  held,  that  one  of  two  executors  cannot  assign  a  nego- 
tiable promissory  note,  made  to  them  as  executors,  for  a  debt  due  to  their 
testator.  In  Ryhiner  v.  Feickert,  92  111.  305,  where  a  note  was  payable 
to  the  order  of  Charles  and  William  Feickert,  who  were  not  partners, 
the  court  ruled  that  the  note  was  not  prima  facie  payable  to  a  firm,  and 
that  the  possession  of  one  joint  owner  was  not  evidence  of  a  partnership. 
In  First  National  Bank  v.  Gridley,  112  App.  Div.  (N.  Y.)  401  (a  case 
since  the  adoption  of  the  statute)  it  was  held,  that  the  indorsement  of 
all  the  payees  was  necessary  to  give  good  title  to  the  transferee.  As 
to  the  right  of  survivorship  of  husband  and  wife  in  a  certificate  of  deposit, 
in  the  name  of  both,  see,  Martz  v.  State  National  Bank,  147  App.  Div. 
(N.  Y.)  250. 

See  Dan.  Neg.  Inst.  Sec.  701a;  Allen  v.  Corn  Exchange  Bank,  87  App.. 
Div.  (N.  Y.)  335;  181  N.  Y.  278. 

Where  a  note  is  payable  to  either  of  two  payees  it  may  be  transferred 
by  the  indorsement  of  one  of  them. 


122  NEGOTIABLE   INSTRUMENTS    LAW 

Voris  V.  Shoonover,  138  Pac.  Rep.  607;  Union  Bank  v.  Spies,  151 
Iowa  178.    See  notes,  Sec.  27,  Subd.  4. 

Regardless  of  the  provisions  of  this  section,  a  negotiable  instnmient 
may  be  transferred  without  indorsement  and  the  transferee  becomes  its 
owner,  and  can  maintain  an  action  thereon  in  his  own  name,  it  being, 
however,  subject  to  all  the  equities  and  defenses  which  the  debtor  had 
at  the  time  of  the  transfer  against  the  claim  in  the  hands  of  the  previous 
holder. 

Martz  V.  State  National  Bank,  147  App.  Div.  (N.  Y.)  250. 

§  72.  Effect  of  instrument  drawn  or  indorsed  to  a  person 
as  cashier.  Where  an  instrument  is  drawn  or  indorsed  to  a 
person  as  "cashier"  or  other  fiscal  ofhcer  of  a  bank  or  corpora- 
tion, it  is  deemed  prima  facie  to  be  payable  to  the  bank  or 
corporation  of  which  he  is  such  officer;  and  may  be  negotiated 
by  either  the  indorsement  of  the  bank  or  corporation,  or  the 
indorsement  of  the  officer. 

Under  the  common  law  the  courts  generally  held  that  an  indorsement 
to  one  as  cashier  was  equivalent  to  an  indorsement  to  the  undisclosed 
bank,  which  is  an  exception  to  the  general  nile  as  to  indorsement  by  agent 
as  provided  in  Sec.  39. 

Bank  of  Genesee  v.  Patchin  Bank,  19  N.  Y.  312;  Bank  of  New  York  v. 
Bank  of  Ohio,  29  N.  Y.  619;  First  National  Bank  of  Angelica  v.  Hall, 
44  N.  Y.  395. 

Where  it  appears  that  the  president  of  a  bank  in  his  official  capacity 
conducted  the  making  and  transfer  of  commercial  paper,  his  acts  in  relation 
thereto  are  binding  on  the  bank. 

Griffin  v.  Erskine,  131  Iowa  444. 

A  check  drawn  to  the  order  of  "Treas.  of  Town  of  Farmingham" 
in  legal  effect,  stands  upon  the  same  footing  as  if  payable  to  the  town, 
and  the  money  which  it  represented  belongs  to  the  town  which  was  the 
real  payee  of  the  check. 

Commercial  Bank  v.  French,  21  Pick.  486;  Quincy  Mutual  Insurance 
Co.  V.  Inter.  Trust  Co.,  217  Mass.  373. 

First  National  Bank  v.  McCullough,  50  Oregon  508,  a  case  arising 
under  the  statute. 


NEGOTIATION  123 

§  73.  Indorsement  where  name  is  wrongly  designated 
or  misspelled.  Where  the  name  of  a  payee  or  indorsee  is 
wrongly  designated  or  misspelled,  he  may  indorsee  the  instru- 
ment as  therein  described,  adding,  if  he  think  fit,  his  proper 
signature. 

An  indorsement  by  a  person  of  the  same  name  as  the  payee  but  not 
the  real  payee  intended  by  the  drawer  is  forgery,  and  no  title  is  derived 
from  such  indorsement. 

Weisberger  v.  Barbarton  Bank  (Ohio),  95  N.  E.  379;  Graves  v.  Am. 
Exch.  Bank,  17  N.  Y.  205;  Cochran  v.  Atchinson,  27  Kan.  728;  Rossi  v. 
Bank  of  Commerce,  71  Mo.  App.  570;  Beattie  v.  National  Bank  of  111., 
174  111.  571. 

Where  the  name  of  the  corporation  was  "L.  Rosenberg,  Incorporated" 
and  the  indorsement  was  "Louis  Rosenberg,  Inc.",  is  not  such  a  variance 
as  to  make  the  indorsement  ineffectual,  especially  as  the  corporation 
received  all  the  benefits  of  the  transaction  with  full  knowledge  of  the  facts. 

Van  Norden  Trust  Co.  v.  Rosenberg,  62  Misc.  285. 

§  74.  Indorsement  in  representative  capacity.  Where 
any  person  is  under  obligation  to  indorse  in  a  representative 
capacity,  he  may  indorse  in  such  terms  as  to  negative  personal 
liability. 

Such  an  indorsement  is  usually  "A  by  B  as  agent,"  or  "B  as  agent 
for  A"  or  "per  procviration  A  (principal)  B"  (agent). 

Where  the  name  of  a  religious  corporation  indorsed  upon  a  promissory 
note  followed  by  the  names  of  its  president  and  treasurer,  the  words 
"finance  committee"  and  the  name  of  the  persons  constituting  such  com- 
mittee, the  indorsements  come  within  the  protection  of  this  section  and 
negatives  any  personal  liability  on  the  part  of  the  individual  signers. 

Chelsea  Exchange  Bank  v.  First  U.  P.  Church,  89  Misc.  (N.  Y.)  619. 

As  to  the  liability  of  executors  or  administrators,  see  Schmittler  v. 
Simon,  101  N.  Y.  554;  Schmittler  v.  Simon,  114  N.  Y.  186.  See  notes 
Sec.  39. 


124  NEGOTIABLE    INSTEUMENTS    LAW 


BiRMiNGnAM .  Ala  . 

Bm>fENGEL%M  Trust  &^avings  Co.« 


bIPMINGHAM.ALA 


fiorroTBE 

OBDEKOF. 


^^-^iCi  ^:>^^^^  CyJ^J^^^ 


tt-jt.,*-^ 


(INDORSED) 

PAY  TO  MRS.  EMMA  BROOKS 

UNION  IRON  WORKS 

B.  B.  SHEPARD,  MGR. 

EMMA  BROOKS 

CHARLES  F.  CAREY 

The  above  indorsement  by  B.  B.  Shepard,  Mgr.,  is   proper  if  so 

authorized  by  the  Union  Iron  Works,  but  without  knowledge  the  paying 

bank  should  investigate  the  authority  of  Shepard  to  so  indorse.     The 

indorsement  of  "Emma  Brooks"  without  prefixing  the  Mrs.  is  immaterial. 

§  75.  Time  of  indorsement ;  presumption.  Except  where 
an  indorsement  bears  date  after  the  maturity  of  the  instru- 
ment, every  negotiation  is  deemed  prima  facie  to  have  been 
effected  before  the  instrrunent  was  overdue. 

Upon  the  trial  the  plaintiff  produced  the  note,  proved  the  indorsement 
of  the  payee  and  the  signature  of  the  maker  and  introduced  it  in  evidence. 
Thus,  the  plaintiff  established  prima  facie  that  it  became  the  owner  of 
the  note  before  it  became  overdue,  in  good  faith  and  for  value  and  without 
notice  of  any  infirmity  in  the  instrument. 

German  American  Bank  v.  Cunningham,  97  App.  Div.  (N.  Y.)  246; 
Colbom  V.  Arbecam,  54  Misc.  623,  104  N.  Y.  Supp.  986. 

An  indorsement  of  a  promissory  note,  in  the  absence  of  evidence  to 
the  contrary,  is  presimied  to  have  been  made  at  or  about  the  date  of  the 
note. 

Mason  v.  Noonan,  7  Wis.  609. 

The  indorsement  of  a  promissory  note  after  maturity  is,  in  effect, 
the  drawing  of  a  new  bill  payable  on  demand,  and,  to  hold  the  indorser, 
demand  and  notice  of  non-payment  are  essential. 


NEGOTIATION  125 

Smith  V.  Caro,  9  Oregon  278;  see  also,  Cedar  National  Nank  v. 
Bashara,  39  Okla.  482. 

§  76.  Place  of  indorsement ;  presumption.  Except  where 
the  contrary  appears  every  indorsement  is  presumed  prima 
facie  to  have  been  made  at  the  place  where  the  instrument  is 
dated. 

A  married  woman  who,  at  her  residence  in  the  State  of  New  Jersey, 
indorsed  in  blank  and  solely  for  his  benefit,  her  husband's  promissory 
note,  dated  and  payable  in  the  State  of  New  York,  where  it  is  discounted 
in  good  faith,  without  notice  that  the  indorser  was  a  non-resident,  or 
that  the  indorsement  was  made  in  another  state,  is  estopped  from  denying 
that  her  indorsement  is  a  New  York  contract  and  from  claiming  it  a  New 
Jersey  contract,  the  laws  of  which  state  do  not  permit  a  married  woman 
to  become  a  simple  accommodation  indorser;  but  if  she  had  written  her 
place  of  residence  after  her  name  the  plaintiff  would  have  been  put  upon 
inquiry  as  to  the  validity  of  such  a  contract  made  in  that  state. 

Chemical  National  Bank  v.  Kellogg,  183  N.  Y.  95;  see  also,  Dan. 
Neg.  Int.  Sec.  728;  Maxwell  v.  Vansant,  46  111.  58;  Belford  v.  Bangs,  15 
111.  App.  76;  Towne  v.  Rice,  122  Mass.  67;  Glidden  v.  Chamberlain,  167 
Mass.  486. 

A  bill  drawn  in  Illinois  and  delivered  to  drawee  in  New  York,  is 
governed  by  the  law  of  the  latter  place,  but  if  in  good  faith  it  is  made 
payable  in  the  former  state,  any  rate  of  interest,  not  exceeding  that  there 
allowed,  may  be  reserved. 

Freese  v.  Brownell,  35  N.  J.  L.  285. 

A  negotiable  instrument  is  presumed  to  have  been  made  where  it 
is  dated,  and  hence  an  action  upon  a  promissory  note  dated  at  the  City 
of  New  York  must  be  deemed  to  be  brought  on  a  contract  made  in  that 
state. 

Manufacturers'  Commercial  Co.  v.  Blitz,  131  App.  Div.  (N.  Y.)  17; 
Chemical  National  Bank  v.  Kellogg,  183  N.  Y.  92. 

§  77.  Continuation  of  negotiable  character.  An  instru- 
ment negotiable  in  its  origin  continues  to  be  negotiable  until 
it  has  been  restrictively  indorsed  or  discharged  by  payment  or 
otherwise. 

A  bill  or  note  does  not  lose  its  negotiable  character  by  being  dis- 
honored, and  the  indorsement  although  made  after  dishonor,  follows  the 


126  NEGOTIABLE   INSTRUMENTS   LAW 

nature  of  the  original  contract,  and  is  negotiable  unless  it  contains  express 
words  of  restriction. 

Leavitt  v.  Putnam,  3  N.  Y.  494;  McSherry  v.  Brooks,  46  Md.  118. 

Where  an  indorser  takes  up  a  promissory  note,  after  it  has  been 
dishonored,  by  paying  the  amount  of  it  to  the  holder,  the  transaction  is 
in  effect  a  re-pvirchase  of  the  note,  and  not  a  payment  of  it,  and  the  indorser 
becomes  vested  again  with  all  rights  which  he  formerly  had  against  prior 
parties  on  the  paper. 

French  v.  Jarvis,  29  Conn.  347. 

A  note  once  negotiable  remains  so  until  paid,  the  fact  that  it  becomes 
overdue  does  not  destroy  its  negotiability. 

Adair  v.  Lenox,  15  Oregon  489. 

A  note  indorsed  after  it  became  due  is  considered  payable  on  demand, 
and  the  demand  and  notice  must  be  made  in  a  reasonable  time. 

Rosson  v.  Carroll,  90  Tenn;  110;  Graul  v.  Strutzel,  53  Iowa  712; 
Gray  v.  Bell,  44  Am.  Dec.  277. 

As  to  discharge  see  Sections  200-206. 

§  78.  Striking  out  indorsement.  The  holder  may  at  any 
time  strike  out  any  indorsement  which  is  not  necessary  to  his 
title.  The  indorser  whose  indorsement  is  struck  out,  and  all 
indorsers  subsequent  to  him,  are  thereby  relieved  from  liabil- 
ity on  the  instrument. 

Variant. — The  Kentucky  statute  substitutes  the  word  "owner"  for 
"holder,"  probably  an  error  in  engrossing. 


This  is  declaratory  of  the  law  as  it  existed  prior  to  the  enactment  of 
the  statute. 

Vanarsdale  v.  Hax,  107  Fed.  878,  880  and  cases  cited;  Mitchell  v. 
Fuller,  15  Pa.  St.  268;  Rand  v.  Dovey,  83  Pa.  St.  281;  Merz  v.  Kaiser, 
20  La.  Ann.  379. 

The  holder  of  a  negotiable  instrument  indorsed  in  blank  is  prima 
facie  the  owner  thereof,  and  the  mere  erasure  of  previous  indorsements 
does  not  destroy  the  presumption. 

King  V.  Bellamy,  82  Kans.  301,  108  Pac.  Rep.  117. 

See  also,  New  Haven  Manufacturing  Co.  v.  New  Haven  Pulp  and 
Board  Co.,  76  Conn.  127;  Ensign  v.  Fogg,  177  Mich.  317;  Quimby  v. 
Vamum,  190  Mass.  211. 

§  79.  Transfer  without  indorsement;  effect  of.  Where 
the  holder  of  an  instrument  payable  to  his  order  transfers  it 
for  value  without  indorsing  it,  the  transfer  vests  in  the  trans- 


NEGOTIATION  127 

feree  such  title  as  the  transferrer  had  therein,  and  the  trans- 
feree acquires,  in  addition,  the  right  to  have  the  indorsement 
of  the  transferrer.  But  for  the  purpose  of  determining 
whether  the  transferee  is  a  holder  in  due  course,  the  negotia- 
tion takes  effect  as  of  the  time  when  the  indorsement  is  actually 
made. 

Variant.— The  Colorado  statute  adds  at  the  end  of  the  first  sentence 
"if  omitted  by  mistake,  accident  or  fraud."  The  IlHnois  and  Missouri 
statutes  change  after  the  word  "right"  in  the  first  sentence  by  substituting 
the  following,  "to  enforce  the  instrument  against  one  who  signed  for 
accommodation  of  his  transferrer,  and  the  right  to  have  the  indorsement 
of  the  transferrer,  if  omitted  by  accident  or  mistake."  The  Wisconsin 
statute  adds  at  the  end  of  the  section,  "When  the  indorsement  was  omitted 
by  mistake  or  there  was  an  agreement  to  indorse  made  at  the  time  of  the 
transfer,  the  indorsements  when  made,  relates  back  to  the  time  of  transfer." 


This  section  does  not  affect  the  provisions  of  Sections  60  and  61. 

A  purchaser  of  a  draft  or  check  who  obtains  title  without  an  indorse- 
ment by  the  payee,  holds  it  subject  to  all  the  equities  and  defenses  existing 
between  the  original  parties,  even  though  he  has  paid  full  consideration, 
without  notice  of  the  existence  of  such  equities  and  defenses. 

Gosen  National  Bank  v.  Bingham,  118  N.  Y.  349;  Meuer  v.  Phoenix 
National  Bank,  94  App.  Div.  (N.  Y.)  331;  Manufacturers,  etc.  Co.  v. 
Blitz,  131  App.  Div.  (N.  Y.)  17;  Bank  of  Bromfield  v.  McKinley,  53 
Colo.  279;  Mayers  v.  McRimmon,  140  N.  C.  640;  Landis  v.  White,  127 
Term.  506;  Meuer  v.  Phoenix  Bank,  42  Misc.  341. 

Where  a  depositor  has  imposed  the  condition  that  his  check  shall 
not  be  paid  without  it  bears  his  indorsement,  the  bank,  if  it  pays  it  to  a 
holder  without  such  indorsement,  runs  the  risk  of  the  transaction,  and 
takes  the  burden  of  showing  that  such  holder  has  acqmred  in  some  way 
the  lawful  title  to  receive  the  funds. 

Lynch  v.  First  National  Bank  of  Jersey  City,  107  N.  Y.  184. 

No  indorsement  is  necessary  to  invest  the  holder  with  the  presumption 
of  ownership  in  due  course,  and  this  presumption  is  indulged  until  over- 
come by  proof  supported  by  evidence. 

Callahan  v.  Louisville  Dry  Goods  Co.,  140  Ky.  714. 

Both  before  and  since  the  enactment  of  the  statute,  it  has  been 
held  that  to  constitute  a  order  in  due  cotu-se  of  a  negotiable  instrument, 
payable  to  order,  it  is  always  required  that  the  same  should  be  indorsed. 

Mayers  v.  McRimmon,  140  N.  C.  643. 


128  NEGOTIABLE    INSTRUMENTS    LAW 

A  negotiable  instrument  bearing  no  indorsement  is  subject  to  attach- 
ment and  sale  imder  execution. 

Fishbum  v.  Londershausen,  50  Or.  363. 

For  the  purpose  of  determining  whether  the  transferee  is  a  holder 
in  due  course,  the  negotiation  takes  effect  as  of  the  time  when  the  indorse- 
ment is  actually  made. 

Manufacturers'  Commercial  Co.  v.  Blitz,  131  App.  Div.  (N.  Y.)  18. 

In  an  action  upon  a  promissory  note,  where  the  plaintiff  alleges  a 
legal  title  thereto  by  indorsement,  it  may  be  doubted  whether  the  mere 
physical  possession  of  the  note  upon  the  trial  is  sufficient  to  support  the 
allegation. 

Brown  v.  Janes,  71  Misc.  316. 

A  certificate  of  deposit,  though  payable  to  the  order  of  the  depositor 
on  the  return  of  the  certificate  properly  indorsed,  may  be  transferred  by 
the  payee  without  indorsement,  and  where  she  owns  the  whole  as  survivor, 
her  right  in  no  way  depends  upon  a  transfer  from  the  indorsement  of  the 
certificate  by  her  husband's  personal  representative. 

Martz  V.  State  National  Bank,  147  App.  Div.  (N.  Y.)  250;  see  also, 
Rivenburg  v.  First  National  Bank,  103  App.  Div.  (N.  Y.)  67;  Manu- 
facturers Commercial  Co.  v.  Blitz,  131  App.  Div.  (N.  Y.)  19;  Martz  v. 
State  National  Bank,  147  App.  Div.  (N.  Y.)  252;  Barker  v.  Barth,  192 
111.  460;  Lancaster  National  Bank  v.  Taylor,  100  Mass.  23;  Kiefer  v, 
Tolbert,  128  Minn.  519;  Bank  of  Madison  v.  Stam.,  186  Mo.  App.  439; 
Carter  v.  Butler,  264  Mo.  324;  O'Connor  v.  Slatter,  48  Wash.  498;  Marling 
V.  Fitzgerald,  138  Wis.  93. 

§  8o.  When  prior  party  may  negotiate  instrument.  Where 
an  instrument  is  negotiated  back  to  a  prior  party,  such  party 
may,  subject  to  the  provisions  of  this  capter,  re-issue  and 
further  negotiate  the  same.  But  he  is  not  entitled  to  enforce 
payment  thereof  against  any  intervening  party  to  whom  he 
was  personally  liable. 

See  notes  Section  202. 


EIGHTS    OF   HOLDER  129 

ARTICLE  6 
Rights  of  Holder 

Section  90.  Right  of  holder  to  sue;  payment. 

91.  What  constitutes  a  holder  in  due  course. 

92.  When  person  not  deemed  holder  in  due  course. 

93.  Notice  before  full  amoimt  paid. 

94.  When  title  defective. 

95.  What  constitutes  notice  of  defect. 

96.  Rights  of  holder  in  due  course. 

97.  When  subject  to  original  defenses. 

98.  Who  deemed  holder  in  due  course. 

§  90.  Right  of  holder  to  sue;  payment.  The  holder  of 
a  negotiable  instrument  may  sue  thereon  in  his  own  name; 
and  payment  to  him  in  due  course  discharges  the  instnmient. 

The  term  "holder"  as  applied  to  negotiable  paper,  has  always  had 
the  well-recognized  legal  meaning  of  the  payee  or  indorsee  of  it,  entitled 
to  receive  the  sum  for  which  it  calls.  With  us  the  term  is  now  statutory 
and  it  means  the  payee  or  indorsee  of  a  bill  or  note,  who  is  in  possession 
of  it,  or  bearer  thereof. 

Olson  V.  Rosenbloom,  247  Pa.  St.  250. 

The  owner  and  holder  of  the  legal  title  to  a  promissory  note  may 
maintain  an  action  to  enforce  collection  thereof,  even  though  a  third 
party  may  be  entitled  to  the  proceeds. 

Stanley  v.  Penny,  75  Kan.  179;  New  Haven  Mfg.  Co.  v.  New  Haven 
Pulp  Co.,  79  Conn.  127. 

Reading  this  section  in  connection  with  Sections  2,  79  and  98,  it  is 
evident  that  the  holder  of  a  note  is  deemed  to  be  the  holder  in  due  course, 
that  is,  to  have  come  lawfully  into  possession  of  it;  and  he  may  maintain 
an  action  in  his  own  name.  No  indorsement  is  necessary  to  invest  the 
presiimption  of  ownership,  but  possession  alone  presupposes  ownership 
in  due  course. 

Callahan  v.  Louisville  Dry  Goods  Co.,  140  Ky.  714. 


130  NEGOTIABLE   INSTRUMENTS   LAW 

A  transferee  of  a  promissory  note  who  takes  the  same  before  maturity 
in  settlement  of  a  precedent  debt,  takes  it  subject  to  all  infirmities. 
Union  Nut  and  Bolt  Co.  v.  Doherty,  20  Misc.  23. 

Pleadings. — A  complaint  which  in  substance  alleges  the  making  of  a 
promissory  note  by  defendants,  by  which  they  agreed  to  pay  to  the  order 
of  the  plaintiff,  a  certain  sum  of  money  and  that  no  part  thereof  has  been 
paid,  states  a  cause  of  action.  The  allegation  that  the  note  was  "made" 
by  defendants  is  equivalent  to  an  allegation  that  it  was  both  signed  and 
delivered.  It  is  not  necessary  to  allege  a  consideration,  as  that  is  pre- 
sumed. 

First  National  Bank  of  Pittsburgh  v.  Stallo,  160  App.  Div.  (N.  Y.) 
702. 

Where  the  plaintiff,  in  an  action  upon  a  promissory  note,  is  the  payee 
thereof,  the  production  of  the  note  is  sufficient,  and  the  objection  of  the 
defendant  to  its  admission  becaxise  no  witness  testified  as  to  who  was  the 
holder  of  it  cannot  avail. 

Williams  v.  Holt,  170  Mass.  351. 

Section  generally  see,  Owen  v.  Storms,  72  Atl.  441 ;  Tullis  v.  McClairy, 
128  la.  495;  Lowell  v.  Bickford,  201  Mass.  543;  Tyson  v.  Joyner,  139 
N.  C.  71;  Smith  v.  Bayer,  46  Or.  143;  Poess  v.  Twelfth  Ward  Bank,  43 
Misc.  48;  Schlesinger  v.  Kurzrok,  47  Misc.  636;  Cleary  v.  Debeck  Co., 
54  Misc.  537;  Marling  v.  Nommensen,  127  Wis.  363. 

§  91.  What  constitutes  a  holder  in  due  course.  A  holder 
in  due  course  is  a  holder  who  has  taken  the  instrument  under 
the  following  conditions: 

1 .  That  it  is  complete  and  regular  upon  its  face ; 

2.  That  he  became  the  holder  of  it  before  it  was  overdue, 
and  without  notice  that  it  had  been  previously  dishonored, 
if  such  was  the  fact ; 

3.  That  he  took  it  in  good  faith  and  for  value; 

4.  That  at  the  time  it  was  negotiated  to  him  he  had  no 
notice  of  any  infirmity  in  the  instrument  or  defect  in  the  title 
of  the  person  negotiating  it. 

The  reason  for  the  rtde  embodied  in  this  section  was  admirably  ex- 
pressed by  Justice  Vann  in  Chemical  National  Bank  v.  Kellogg,  183 
N.  Y.  94.     "The  business  of  the  coimtry  is  done  so  largely  by  means  of 


EIGHTS    OF   HOLDER  131 

commercial  paper  that  the  interests  of  commerce  require  that  a  promissory- 
note,  fair  on  its  face,  should  be  as  negotiable  as  a  government  bond.  Every 
restriction  upon  the  circulation  of  negotiable  paper  is  an  injury  to  the 
state,  for  it  tends  to  damage  trade  and  hinder  the  transaction  of  business. 
Commercial  necessity  requires  that  only  slight  evidence  should  be  insisted 
upon  to  establish  an  estoppel  in  pais  as  to  the  validity  of  commercial 
paper.  The  only  practical  rule  is  to  make  the  face  of  the  paper  itself, 
when  free  from  suspicion,  sufficient  evidence,  in  the  absence  of  notice, 
against  all  who  aided  to  put  it  into  circulation  in  that  condition,  unless 
the  note  is  void  by  the  positive  command  of  a  statute,  such  as  the  act  of 
usury.  No  other  rule  would  work  well,  for  it  would  be  intolerable  if  every 
bank  had  to  learn  the  true  history  of  each  piece  of  paper  presented  for 
discount.  It  is  better  that  there  should  be  an  occasional  instance  of 
hardship  than  to  have  doubt  and  distrust  hamper  a  common  method  of 
making  commercial  exchange." 

Subd.  I. — A  party  purchasing  commercial  paper  which  remains  in 
some  essential  incomplete  and  imperfect  does  not  acquire  the  character 
of  a  bona  fide  holder,  unless  authority  is  reposed  in  some  one  to  supply 
anything  needed  to  make  it  perfect. 

Davis  Sewing  Machine  Co.  v.  Best,  105  N.  Y.  67;  Dan'l  Neg.  Int. 
Sections  841,  842;  Hunter  v.  Allen,  127  App.  Div.  (N.  Y.)  574. 

The  addition  of  the  words  "payable  with  interest"  to  a  negotiable 
note,  in  the  same  handwriting  as  the  body  of  the  note,  written  on  the 
blank  space  after  the  words  "value  received,"  at  the  most  appropriate 
place  on  the  note  on  which  it  could  be  written  without  interlining  them 
(in  the  absence  of  anything  on  the  face  of  the  note  to  show  that  it  had 
been  altered  or  to  awaken  suspicion)  does  not  render  the  note  incomplete 
within  the  meaning  of  this  section. 

American  Bank  of  Orange  v.  McComb,  105  Va.  473. 

Where  an  inspection  of  a  check  shows  that  the  date  has  been  changed, 
a  purchaser  thereof  has  notice  of  its  infirmity  and  cannot  recover  thereon, 
as  a  holder  in  due  course. 

EHas  V.  Whitney,  50  Misc.  326. 

That  the  payee  of  a  check  may  be  a  holder  in  due  course  if  he  com- 
plies with  the  requirements  of  the  Negotiable  Instruments  Law  has  been 
held,  among  other  cases,  in  Boston  Steel  &  Iron  Co.  v.  Steuer,  183  Mass. 
140,  66  N.  E.  646,  97  Am.  St.  Rep.  426;  Thorpe  v.  White,  188  Mass.  333, 
74  N.  E.  592,  and  Brown  v.  Brown,  91  Misc.  Rep.  220,  154  N.  Y.  Supp. 
1098;  Buzzel  v.  Tobin,  201  Mass.  1. 


132  NEGOTIABLE   INSTBUMENTS   LAW 

Subd.  2. — An  indorsee  of  a  promissory  note,  taking  it  as  collateral 
security  for  an  antecedent  debt  without  other  consideration,  but  in  good 
faith  and  before  maturity,  occupies  the  position  of  a  holder  for  value. 

Continental  National  Bank  v.  Townsend,  87  N.  Y.  8. 

The  authorities  hold  that  the  mere  crediting  to  a  depositor's  account, 
on  the  books  of  a  bank,  of  the  amount  of  a  check  drawn  upon  another 
bank,  where  the  depositor's  account  continues  to  be  sufficient  to  pay  the 
check  in  case  it  is  dishonored,  does  not  constitute  the  bank  a  holder  in  due 
course. 

Citizens'  State  Bank  v.  Cowles,  180  N.  Y.  349;  Albany  County 
Savings  Bank  v.  Peoples'  Co-Op.  Ice  Co.,  92  App.  Div.  (N.  Y.)  47 ;  Thomp- 
son V.  Sioux  Falls  Bank,  150  U.  S.  231;  Dykman  v.  Northbridge,  80  Hun. 
258;  Fox  v.  Bank  of  Kansas  City,  30  Kans.  441;  U.  S.  National  Bank  v. 
McNair,  114  N.  C.  335;  Fredonia  National  Bank  v.  Tommei,  131  Mich. 
674;  First  National  Bank  v.  McNairy,  122  Minn.  215;  Morrison  v.  Farmers 
and  Merchants  Bank,  9  Okla.  697. 

A  note  dated  Sept.  21st  was  made  payable  one  day  after  date.  One 
purchased  the  note  on  the  day  after  its  date.  Held,  that  as  the  note 
was  not  overdue  at  any  time  on  the  day  after  its  date  the  purchaser  was 
a  holder  for  value. 

Wilkins  v.  Usher,  123  Ky.  697. 

A  purchase  for  value  of  negotiable  paper  after  maturity  is  not  a 
bona  fide  purchaser  to  the  extent  of  being  protected  in  his  purchase 
against  the  rightful  owner,  from  whom  it  had  been  stolen,  unless  he  has 
succeeded  to  the  rights  of  a  bona  fide  purchaser  before  maturity. 

Northampton  National  Bank  v.  Kidder,  106  N.  Y.  221. 

One  who  signs  a  note  without  reading  it  when  he  can  read  and  has  an 
opportimity  to  do  so,  his  signature  being  obtained  through  misrepresenta- 
tion as  to  the  character  of  the  instrument,  cannot  set  up  his  own  omission 
against  one  who  becomes  a  bona  fide  holder  by  discounting  it  for  value 
before  maturity. 

Mimnich  v.  Joffe,  164  App.  Div.  (N.  Y.)  30;  Marks  v.  First  National 
Bank,  58  Am.  Rep.  (Ala.)  550. 

One  who  cashes  a  check  for  full  value  within  a  reasonable  time  after 
it  was  delivered  to  the  payee,  without  knowledge  of  any  invalidity,  either 
in  its  inception  or  in  its  indorsement  and  transfer,  is  a  bona  fide  holder 
of  a  negotiable  instrument  before  maturity  for  value,  and  can  recover 
from  the  drawers  thereof. 

Poshkoff  V.  Bernstein,  159  N.  Y.  Supp.  206;  see  also,  Jacobus  v. 
Jamestown  Mantel  Co.,  149  App.  Div.  (N.  Y.)  356;  Austin  v.  Bank  of 
Scottsville,  150  Ky.  113;  Johnson  Co.  Savings  Bank  v.  Walker,  79  Conn. 


EIGHTS    OF   HOLDEE  133 

348;  Shawmut  National  Bank  v.  Manson,  168  Mass.  425;  Kernohan  v. 
Durham,  48  Ohio  St.  1;  Lindsay  v.  Dutton,  217  Pa.  St.  148;  Quiggle  v. 
Herman,  131  Wis.  379;  Northfield  National  Bank  v.  Arnot,  132  Wis.  383. 

Subd.  3. — As  to  what  constitutes  value  see  Sec.  51,  52.  The  action 
of  a  bank  in  discounting  a  promissory  note  and  placing  the  avails  thereof 
to  the  payee's  credit,  does  not  of  itself  constitute  the  bank  a  bona  fide 
holder  for  value  of  the  note. 

Consolidation  Bank  v.  Kirkland,  99  App.  Div.  (N.  Y.)  121 ;  Merchants' 
National  Bank  v.  Santa  Maria  Co.,  162  App.  Div.  (N.  Y.)  249. 

The  bank  does  not  become  a  holder  for  value  until  it  has  paid  over 
the  proceeds  of  the  note  to  the  payee. 

Albany  Cotmty  Bank  v.  Peoples'  Ice  Co.,  92  App.  Div.  48;  Miller  v. 
Norton,  114  Va.  610;  Thompson  v.  Sioux  Falls  Bank,  150  U.  S.  231; 
N.  Y.  County  Bank  v.  Massey,  192  U.  S.  138,  145;  Dan.  Neg.  Int.  Sec. 
779b. 

It  is  quite  generally  held  by  the  coiuts  that  the  mere  transaction  of 
discoimting  a  note  and  crediting  the  amoimt  on  the  books,  without  more, 
does  not  constitute  the  bank  a  holder  in  due  course.  The  credit  must  be 
absorbed  by  antecedent  indebtedness  or  subsequent  withdrawals.  How- 
ever, a  bank  which  discoimts  a  promissory  note,  crediting  the  proceeds 
to  the  indorser's  account,  which  becomes  exhausted  before  the  maturity 
of  the  note,  is  a  purchaser  for  value,  notwithstanding  the  indorser  subse- 
quently has  deposits  equal  to  the  amount  of  the  note  (Fredonia  National 
Bank  v.  Tommei,  131  Mich.  674;  First  National  Bank  v.  McNairy,  122 
Minn.  215  [holding  that  in  determining  whether  such  credit  has  been 
exhausted,  the  rule  is  to  be  applied  that  as  checks  are  paid  the  amount 
is  to  be  charged  against  the  oldest  item  of  deposit  or  credit  of  the  cus- 
tomer]; Dreilling  v.  Bank,  43  Kan.  197;  Shawmut  National  Bank  v. 
Manson,  168  Mass.  425;  Second  National  Bank  v.  Weston,  170  N.  Y.  250; 
Hatch  V.  New  York  City  4th  National  Bank,  147  N.  Y.  184;  Oppenheimer 
V.  Radke  &  Co.,  20  Cal.  App.  518;  McCasland  v.  Southern  111.  National 
Bank,  127  111.  App.  37;  Choteau  Trust  Co.  v.  Smith,  133  Ky.  418;  Symonds 
V.  Riley,  188  Mass.  470). 

In  Merchants'  National  Bank  v.  Santa  Maria  Sugar  Co.,  147  N.  Y. 
Supp.  498,  plaintiff  bank  discounted  for  a  customer  before  maturity, 
the  note  sued  on  crediting  the  proceeds  of  the  discount  to  the  customer's 
account,  which  account  at  all  times  prior  to  the  dishonor  of  the  note  con- 
tained a  balance  in  the  customer's  favor  in  excess  of  the  amount  due  on 
the  note,  but  if  the  earliest  credits  were  applied  to  the  earliest  debits  the 
proceeds  of  the  discotmt  would  have  been  paid  out  prior  to  any  notice 
acquired  by  the  bank  of  any  infirmity  in  the  note.     It  was  held  that, 


134  NEGOTIABLE    INSTRUMENTS    LAW 

while  the  bank  did  not  become  a  purchaser  for  value  by  merely  crediting 
the  proceeds  of  the  discount  to  the  customer's  account,  it  did  acquire  such 
position  when  the  proceeds  were  paid  out,  and  that  the  same  should  be 
treated  as  paid  out  by  an  appHcation  of  the  rule  that  the  first  items  on 
the  debit  side  were  chargeable  against  the  first  items  on  the  credit  side 
of  the  account. 

In  the  absence  of  proof  of  fraud  or  misappropriation,  the  presumption 
is  that  the  indorsee  of  a  negotiable  bill  or  note  is  a  bona  fide  holder  for 
value,  and  this  presumption  is  not  repelled  merely  by  proof  that  the  bill 
or  note  as  between  the  immediate  parties  was  without  consideration. 

Mitchell  V.  Baldwin,  88  App.  Div.  (N.  Y.)  268;  Harger  v.  Worrall, 
69  N.  Y.  370;  Cluett  v.  Couture,  140  App.  Div.  (N.  Y.)  830. 

When  a  check  is  deposited  at  a  bank  it  is  generally  for  collection  by 
the  bank  as  agent  of  the  depositor,  and  the  bank  does  not  owe  the  amount 
imtil  its  collection  is  accompHshed. 

National  Bank  v.  Miller,  77  Ala.  173,  54  Am.  Rep.  50;  Fayette 
National  Bank  v.  Summers,  105  Va.  693. 

What  constitutes  good  faith  upon  the  part  of  a  holder  of  negotiable 
paper  has  been  defined  in  the  following  language: 

"He  is  not  boimd  at  his  peril  to  be  on  the  alert  for  circxmistances 
which  might  possibly  excite  the  suspicion  of  wary  vigilance;  he  does  not 
owe  to  the  party  who  puts  the  paper  afloat  the  duty  of  active  inquiry  in 
order  to  avert  the  imputation  of  bad  faith.  The  rights  of  the  holder  are 
to  be  determined  by  the  simple  test  of  honesty  and  good  faith,  and  not 
by  a  speculative  issue  as  to  his  diUgence  or  neghgence.  The  holder's 
rights  cannot  be  defeated  without  proof  of  actual  notice  of  the  defect  in 
title  or  bad  faith  on  his  part  evidenced  by  circumstances.  Though  he  may 
have  been  negligent  in  taking  the  paper,  and  omitted  precautions  which 
a  prudent  man  would  have  taken,  nevertheless,  unless  he  acted  mala 
fide,  his  title,  according  to  settled  doctrine,  will  prevail."  Cheever  v. 
Pittsburgh  Ry.  Co.,  150  N.  Y.  59,  44  N.  E.  701,  34  L.  R.  A.  69,  55  Am. 
St.  Rep.  646. 

The  term  "good  faith"  means  not  only  honesty  of  intention,  but  the 
absence  of  suspicious  circumstances,  or,  if  such  circumstances  exist,  then 
such  inquiry  as  will  satisfy  a  prudent  man  of  the  validity  of  the  tran- 
saction. 

Pennington  Bank  v.  Moorehead  Bank,  125  N.  W.  (Minn.)  119; 
Williams  v.  Huntington,  13  Atl.  (Md.)  336. 

Where  the  negotiable  paper  signed  by  a  person  considered  to  be 
solvent  is  sold  at  a  very  large  discount,  such  circumstance  alone  is  siifficient 
to  require  the  purchaser  to  make  inquiry  as  to  the  genuineness  thereof; 
if  he  fails  to  make  such  inquiry  he  is  not  to  be  deemed  a  bona  fide  purchaser, 


RIGHTS   OF   HOLDER  135 

and  in  any  case  the  fact  that  the  paper  was  purchased  at  a  discount  may, 
in  connection  with  other  circumstances,  rebut  the  presimiption  that  the 
holder  is  one  in  due  course. 

Vosburg  V.  Diefendorf,  119  N.  Y.  357;  Griffith  v.  Shipley,  74  Md.  591; 
Canajoharie  National  Bank  v.  Diefendorf,  123  N.  Y.  191. 

One  who  purchases  notes  calling  for  the  payment  of  $7,500  in  good 
faith  and  before  maturity,  is  a  holder  in  due  course,  although  he  pays 
only  $5,000  for  the  notes. 

Moore  v.  Burling,  160  Pac.  (Wash.)  420;  Ham  v.  Merritt,  149  S.  W. 
(Ky.)  11;  Citizens  Bank  v.  Stewart,  22  Col.  App.  91. 

The  mere  possession  of  the  note  by  the  plaintiff  raises  a  presumption, 
without  other  evidence,  that  he  is  a  holder  in  good  faith,  and  it  is  not 
until  it  has  been  shown  by  appropriate  evidence  that  the  instnmient  was 
procured  and  put  in  circulation  by  fraud  that  any  burden  is  cast  upon 
him  to  explain  his  possession,  and  give  affirmative  evidence  that  he  acquired 
title  in  due  course  of  business  and  without  notice  of  the  fraud. 

Cox  V.  Cline,  139  Iowa,  128,  117  N.  W.  48. 

The  purchaser  of  a  note  for  considerably  less  than  the  face  value 
from  an  entire  stranger,  without  any  knowledge  or  inquiry  into  the  financial 
responsibility  of  its  maker  or  indorsers,  can  hardly  be  said  to  show  that 
the  purchaser  was  a  holder  in  due  course;  on  the  contrary,  it  tends  to 
indicate  that  a  disclosure  of  the  whole  truth  would  have  been  fatal  to  that 
claim. 

Harris  v.  Johnson,  89  Conn.  128;  Stewart  v.  Lansing,  104  U.  S.  505; 
King  V.  Doane,  139  U.  S.  166. 

What  constitutes  good  faith  has  been  the  subject  of  frequent  dis- 
cussion, and  while  a  difference  of  opinion  may  exist  on  some  points,  there 
is  perfect  uniformity  in  the  decisions  that  the  want  of  good  faith  in  the 
transaction  is  fatal  to  the  title  of  the  holder,  and  that  gross  carelessness, 
although  not  sufficient  of  itself  as  a  question  of  law  to  defeat  title,  con- 
stitutes evidence  of  bad  faith. 

C.  N.  Bank  v.  Diefendorf,  123  N.  Y.  202;  Seybel  v.  N.  C.  Bank,  54 
N.  Y.  288;  Duchess  Co.  M.  Ins.  Co.  v.  Hachfield,  73  N.  Y.  228;  Dan. 
Neg.  Int.  Sec.  819;  Am.  Exchange  Bank  v.  N.  Y.  Belting  Co.,  148  N.  Y. 
705;  Knox  v.  Eden  Musee  Co.,  148  N.  Y.  454;  Jarvis  v.  Manhattan  Beach 
Co.,  148  N.  Y.  652;  Cheever  v.  Pittsburgh  R.  R.,  150  N.  Y.  66;  44  N.  E. 
701,  34  L.  R.  A.  69;  Ward  v.  City  Trust  Co.,  192  N.  Y.  73 ;  Cole  v.  Harrison, 
167  App.  Div.  (N.  Y.)  336;  Oliver  v.  Goldberg,  168  App.  Div.  (N.  Y.) 
874;  McBee  Co.  v.  Shoemaker,  160  N.  Y.  Supp.  251. 

A  gift  of  a  negotiable  instrimient  to  a  third  party  is  not  such  a  nego- 
tiation of  it  in  the  usual  course  of  business  as  to  give  to  the  donee  the 
full  protection  which  is  extended  to  a  bona  fide  holder  for  value. 


136  NEGOTIABLE   INSTEUMENTS   LAW 

Greer  v.  Orchard,  175  Mo.  App.  494;  Dan.  Neg.  Int.  Sec.  181. 

If  one  purchases  an  accommodation  note  for  cash  and  sells  it  to  a 
bona  fide  purchaser  in  exchange  for  the  purchaser's  own  note,  the  pur- 
chaser may  be  foimd  to  be  a  holder  of  the  note  in  due  course  within  the 
meaning  of  this  section. 

Methlinger  v.  Harriman,  185  Mass.  245. 

Notice  or  knowledge  of  an  infirmity  existing  in  a  negotiable  instru- 
ment which  will  invalidate  in  the  hands  of  an  indorsee  must  be  actual, 
or  of  such  facts  that  his  action  in  taking  it  amounts  to  bad  faith;  and 
where  the  facts  shown  have  any  tendency  to  show  bad  faith  the  question 
is  one  of  fact. 

McNight  V.  Parsons,  136  Iowa  391. 

Where  a  promissory  note  payable  "to  the  order  of  A  or  B,"  is  indorsed 
by  "A"  only,  to  one  who  takes  it  in  good  faith,  for  value  and  without  any 
notice  of  infirmity  in  the  instnunent  or  defect  in  title,  the  indorsee  is  a 
holder  in  due  course. 

Voris  v.  Schoonover,  91  Kans.  530;  Union  Bank  v.  Spies,  151  Iowa 
178,  130N.  W.  928. 

It  may  be  stated  as  a  rule  that  suspicious  circumstances  alone,  even 
though  sufficient  to  put  an  ordinarily  prudent  person  on  inquiry,  will  not, 
in  the  absence  of  bad  faith  or  a  willful  disregard  of  the  facts  showing  an 
infirmity  of  the  paper,  destroy  the  title  of  the  taker  as  that  of  a  bona  fide 
holder. 

Walters  v.  Rock,  115  N.  W.  Rep.  514;  Sinkler  v.  Siljan,  136  Cal.  356; 
Mass.  National  Bank  v.  Snow,  187  Mass.  159;  Robbins  v.  Swinburne  Co., 
91  Minn.  491;  Second  National  Bank  v.  Morgan,  165  Pa.  199;  Smith  v. 
Livingston,  111  Mass.  342;  Goetting  v.  Day,  87  N.  Y.  Supp.  510;  Cole  v. 
Harrison,  167  App.  Div.  336. 

As  to  a  payee  as  holder  in  due  course. — The  question  as  to  whether 
a  payee  taking  a  bill  or  note  without  inquiry  and  for  value  from  one  other 
than  the  drawer  or  maker  can  inforce  in  free  from  equities  is  not  free  from 
doubt.  The  question  seems  has  not  been  raised  in  New  York,  excepting 
a  reference  thereto  in  Schreyer  v.  Bailey,  89  Supp.  870,  and  Empire  T. 
Co.  V.  Manhattan  Co.,  162  Supp.  630.  In  other  jurisdictions,  however, 
held  that  a  payee  is  entitled  to  the  same  protection  tmder  the  section  as 
any  other  bona  fide  holder  for  value. 

Boston  Steel  and  Iron  Co.  v.  Steuer,  183  Mass.  140;  Thorpe  v.  White, 
188  Mass.  ZZi,  334;  Mersick  v.  Alderman,  77  Conn.  634;  South  Boston 
Iron  Co.  V.  Brown,  63  Me.  139;  Campbell  v.  4th  National  Bank,  137  Ky. 
555;  Glascock  v.  Rand,  14  Mo.  550;  American  Exchange  National  Bank  v. 
Armstrong,  133  U.  S.  443,  453;  Hodges  v.  Nash,  141  111.  391;  Cagle  v. 
Lane,  49  Ark.   465;   Daniel  on  Negotiable   Instnmients,   Section   178; 


EIGHTS   OF   HOLDER  137 

Payson  on  Bills  and  Notes,  pp.  181,  199;  Van  Ploeg  v.  Van  Zutik,  135 
la.  350;  13  L.  R.  A.  490;  Long  v.  Shafer,  185  Mo.  App.  641,  171  S.  W.  690. 

The  assignment  of  notes  before  maturity  to  a  bank,  as  collateral 
for  a  loan,  without  notice  of  any  equities  between  the  original  parties, 
makes  the  bank  a  holder  in  due  course.  The  defense  of  want  of  con- 
sideration is  not  available  against  the  bank. 

McLean  Co.  Bank  v.  Brown,  187  S.  W.  Rep.  785. 

Cases  on  the  subject  generally,  see,  Campbell  v.  Fourth  National 
Bank,  137  Ky.  555;  Benedict  v.  Kress,  97  App.  Div.  (N.  Y.)  67;  National 
Park  Bank  v.  Saitta,  127  App.  Div.  (N.  Y.)  624;  Hurst  v.  Lee,  143  App. 
Div.  (N.  Y.)  614;  Laschinsky  v.  Margoles,  129  App.  Div.  (N.  Y.)  529; 
Strickland  v.  Henry,  66  App.  Div.  (N.  Y.)  24;  Wallabout  Bank  v.  Peyton, 
123  App.  Div.  (N.  Y.)  727;  Wiser  v.  Osteyee,  24  Misc.  704;  Bank  of  Monon- 
gahela  v.  Weston,  172  N.  Y.  268;  R.  and  C.  Turnpike  Co.  v.  Paviour, 
164  N.  Y.  281;  Com.  National  Bank  v.  State  Bank,  132  la.  706;  Thorke  v. 
White,  188  Mass.  333;  Mehlinger  v.  Harriman,  185  Mass.  245;  White  v. 
Dodge,  187  Mass.  449;  Banking  Co.  v.  Hall,  119  Tenn.  550;  Glascock  v. 
Rand,  14  Mo.  550;  Eagle  v.  Lane,  49  Ark.  465;  Brown  v.  Brown,  91  Misc. 
222;  Mersick  v.  Alderman,  77  Conn.  634;  Campbell  v.  4th  National 
Bank,  137  Ky.  555;  Hodges  v.  Nash,  141  111.  391;  Vander  Ploeg  v.  Van 
Zuuk,  135  Iowa  350;  29  L.  R.  A.  351;  44  L.  R.  A.  395;  Oliner  v.  Golden, 
168  App.  Div.  (N.  Y.)  874. 

Subd.  4. — As  to  what  constitutes  notice  see,  Sec.  95. 

In  an  action  by  the  indorsee  of  a  bill  of  exchange,  if  it  appears  on  the 
part  of  defendant  that  the  defendant  or  a  prior  party  made  it  imder 
duress,  or  was  defrauded  of  it,  or  had  only  part  of  its  value,  the  plaintiff 
must  be  prepared  to  prove  under  what  circumstances  and  for  what  value 
he  became  the  holder. 

Chitty  on  Bills,  12  Am.  ed.  Sec.  648;  C.  N.  Bank  v.  Diefendorf, 
123  N.  Y.  204. 

One  who  takes  negotiable  paper  for  value  before  due,  without  actual 
notice  of  any  defect  therein,  has  the  right  to  assimie  that  the  relations  to 
the  paper  of  every  party,  whose  name  appears  on  it  are  precisely  what 
they  appear  to  be. 

Cheever  v.  Pittsburgh,  etc.  R.  R.,  150  N.  Y.  59. 

Mere  surmise  or  suspicion  is  not  sufficient  to  put  a  purchaser  upon 
inquiry.  The  facts  or  circumstances  to  put  him  on  inquiry  must  be 
such  as  to  show  dishonesty  or  bad  faith  on  his  part  in  refraining  from 
making  inquiry. 

Manhattan  Sav.  Inst.  v.  N.  Y.  National  Exch.  Bank,  170  N.  Y.  58; 
Bank  of  Monongahela  v.  Weston,  172  N.  Y.  259;  Perth  Amboy  Loan 


138  NEGOTIABLE    INSTRUMENTS    LAW 

Assn.  V.  Chapman,  178  N.  Y.  558;  Hibbs  v.  Brown,  112  App.  Div.  (N.  Y.) 
224;  Dan.  Neg.  Inst.  Sec.  1503;  Blum  v.  Davis,  159  N.  Y.  Supp.  206. 

A  person  taking  a  check  drawn  by  a  guardian  upon  an  account 
standing  in  his  name  as  such  is  put  upon  inquiry  to  ascertain  the  authority 
of  the  guardian  to  use  the  money,  and  where  it  is  misappHed  the  infant 
can  compel  an  accoimting  for  the  amount. 

Cohnfeld  v.  Tanenbaimi,  176  N.  Y.  126;  Empire  State  Surety  Co.  v. 
Nelson,  141  App.  Div.  850. 

The  maker  of  a  negotiable  promissory  note,  which  on  its  face,  purports 
to  be  for  value  received  and  negotiated  before  maturity,  cannot  escape 
liability  upon  what  is  at  most  a  mere  guess,  that  the  purchaser  had  knowl- 
edge at  the  time  of  the  purchase  of  some  agreement  between  the  maker 
and  payee.  Were  the  rule  otherwise,  there  would  be  no  safety  in  pur- 
chasing commercial  paper. 

Heinbach  v.  Doubleday,  Page  &  Co.,  130  App.  Div.  (N.  Y.)  37. 

Where  a  bill  or  note  is  indorsed  by  a  person  in  an  official  capacity, 
as  by  Executor,  Trustee,  or  Guardian,  etc.,  the  purchaser  is  put  on  inquiry. 

People  V.  Bank  of  N.  A.,  75  N.  Y.  547;  Strong  v.  Strouss,  40  Ohio 
St.  87;  Langdon  v.  Bank,  52  Am.  Rep.  (Vt.)  113. 

When  the  word  executor,  administrator,  trustee,  guardian  or  the 
like  when  appended  to  the  name  of  the  payee  of  a  bill,  note  or  check,  is 
sufficient  to  charge  a  purchaser  with  notice  of  the  restrictions  and  limit- 
ations of  his  powers  to  dispose  of  the  instniment.  The  term  is  a  warning 
to  every  one  who  reads  it  that  the  payee  named  is  not  the  owner  and  that 
he  holds  it  for  the  use  and  benefit  of  another  and  that  he  has  no  right  to 
sell  or  dispose  of  it  without  authority. 

State  V.  Jahrus,  41  S.  Rep.  575;  117  La.  286;  Henshaw  v.  State  Bank, 
239  111.  515;  Hazletine  v.  Keenan,  54  W.  Va.  600;  46  S.  E.  609;  Geyser 
Co.  v.  Stark,  106  Fed.  558;  Bucher  v.  Buckingham,  18  Conn.  110. 

Where  a  bank  discoimts  negotiable  paper  void  for  usiiry,  but  in  good 
faith  and  without  knowledge  of  its  previous  taint,  it  is  not  deprived  of 
the  right  to  collect  it  from  the  maker. 

Schlessinger  v.  Gilhooly,  189  N.  Y.  1. 

But  where  discounted  with  knowledge  see,  Schlessinger  v.  Leahmaier, 
191  N.  Y.  69. 

This  section  does  not  mean  that  when  the  title  of  the  holder  of  a  note 
indorsed  in  blank,  which  has  been  accepted  by  a  bank  as  collateral  se- 
curity, is  shown  to  be  defective,  the  bank  must  prove  that  it  accepted 
the  note  before  it  was  overdue,  but  means  that  the  bank  must  prove 
that  at  the  time  the  note  was  negotiated  to  it  it  had  no  notice  of  any 
infirmity  in  the  instrument  or  defect  in  the  title  of  the  person  negotiat- 
ing it. 


EIGHTS    OF   HOLDER  139 

Justice  V.  Stoneciper,  267  111.  448;  Savings  Bank  v.  Claussen,  137 
Iowa  72. 

A  negotiable  promissory  note  is  not  dishonored  by  reason  of  the 
failure  to  pay  interest  prior  to  maturity  of  the  principal,  in  the  absence 
of  a  stipulation  to  that  effect;  but  the  fact  that  interest  is  due  and  unpaid 
is  a  material  circumstance  bearing  on  the  question  of  whether  the  pur- 
chaser acquired  the  note  in  good  faith  and  without  notice  of  prior  equities 
of  infirmities  in  the  title. 

McPherrin  v.  Tittle,  36  Okla.  510;  Dan.  Neg.  Int.  Sec.  787. 

The  purchaser  of  a  past-due  note  takes  it  with  notice  of  any  defense 
to  the  note  which  the  maker  may  have,  but  does  not  take  it  with  notice 
of  the  secret  equities  of  third  persons. 

Kempner  v.  Huddleston,  90  Tex.  184,  37  S.  W.  1066;  Cordage  Co.  v. 
Seymour,  67  Minn.  311,  69  N.  W.  1082;  Moffett  v.  Parker,  71  Minn.  139, 
73  N.  W.  851,  70  Am.  St.  Rep.  319;  Layman  v.  Vicknair,  47  La.  Ann. 
679,  17  South.  265;  Bank  v.  Garlick,  137  La.  282,  68  South.  611;  Dulin 
v.  Hunter,  98  Ala.  539,  13  South.  301;  Porter  v.  King  (D.  C.)  1  Fed. 
760;  Mohr  v.  Byrne,  135  Cal.  87,  67  Pac.  11;  Gymnasium  Co.  v.  Vank, 
179  111.  599,  54  N.  E.  297,  46  L.  R.  A.  753,  70  Am.  St.  Rep.  135;  Justice  v. 
Stonecipher,  267  111.  448,  108  N.  E.  723;  Jones  on  Mortgages,  Sec.  843. 

Action  by  the  transferee  of  a  draft  against  the  acceptor.  It  appeared 
that  the  defendant,  a  foreigner,  unable  to  read  English,  had  entered 
into  a  contract  with  a  manufacttuing  jewelry  company  by  which  he  was 
to  sell  their  jewelry  on  commission,  but  was  not  to  be  charged  for  any 
goods  which  he  was  unable  to  sell.  Later,  on  the  day  the  jewelry  was 
received,  he  was  induced  by  another  agent  of  the  vendor  to  sign  four 
docimients  under  the  representation  that  the  goods  were  sent  on  com- 
mission and  that  the  papers  were  to  be  held  merely  as  collateral  security. 
The  papers  were  in  fact  drafts  which  the  defendant,  by  his  signature, 
accepted  and  which  by  transfer  came  into  the  hands  of  the  present  plain- 
tiff, a  bank  located  in  a  town  in  a  foreign  State  where  the  jewelry  company 
had  its  place  of  business.  It  iurther  appeared  that  the  jewelry  received 
by  the  defendant  was  worthless,  that  he  had  returned  the  same  and 
repudiated  all  liability.     On  all  the  evidence. 

Held,  that  the  jury  was  justified  in  finding  that  the  acceptance  of 
the  defendant  was  procured  by  active  fraud  and  deceit,  and  to  find  further 
that  the  plaintiff  was  not  a  bona  fide  holder  in  due  course,  even  though, 
with  the  assistance  of  the  jewelry  company,  it  gave  testimony  to  that 
effect. 

Johnson  Co.  Savings  Bank  v.  Komhauser,  174  App.  Div.  (N.  Y.) 
136;  but  see  Kellogg  v.  Hale,  190  111.   15;  National  Bank  v.  Hall,  151 


140  NEGOTIABLE   INSTRUMENTS   LAW 

N.  W.  (la.)  120;  cited  in  notes  Section  94,  fraud;   Chapman  v.  Rose, 
56  N.  Y.  137,  note  Section  91,  Subdivision  4. 

On  the  subject  generally,  see,  Morton  v.  New  Orleans,  etc.  Ry., 
79  Ala.  590;  Groh's  Sons  v.  Schneider,  34  Misc.  196;  Bank  of  North 
America  v.  Kirby,  108  Mass.  497;  McLane  v.  Placeville  S.  V.  Ry.,  66  Cal. 
606;  Town  of  Ontario  v.  Hill,  99  N.  Y.  324;  Armstrong  v.  Am.  Ex.  Bank, 
133  U.  S.  434;  Bergstrom  v.  Ritz-Carlson  Co.,  157  N.  Y.  Supp.  962; 
Brown  v.  Brown,  91  Misc.  220;  Boston  Steel  and  Iron  Co.  v.  Steuer,  183 
Mass.  140;  Thorpe  v.  White,  188  Mass.  333;  Carpenter  v.  Hoadley,  138 
App.  Div.  (N.  Y.)  190;  Citizens  Savings  Bank  v.  Couse,  68  Misc.  153; 
Liberty  Trust  Co.  v.  Tilton,  217  Mass.  462;  Nat.  Investment  and  Surety 
Co.  V.  Corey,  (Mass.)  Ill  N.  E.  357;  Johnson  v.  Kettell  v.  Longly,  207 
Mass.  52,  56;  Merchants  Bank  v.  Branson,  165  S.  C.  344;  Central  Trust 
Co.  v.  First  National  Bank,  101  U.  S.  68;  Hughes  v.  Flint,  61  Wash.  460; 
Goshen  Bank  v.  Bingham,  118  N.  Y.  349. 


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A  promissory  note  was  made  payable  to  "Wonder  Stock  Powder 
Co."  The  only  indorsement  is  ''James  J.  Doty,  Prop."  A  banker  who 
purchased  it  testified  that  Mr.  Doty  was  the  sole  owner  of  the  company, 
but  there  was  no  evidence  as  to  whether  the  payee  was  a  corporation 
or  a  trade  name  for  Doty.  Held,  that  the  indorsement  did  not  constitute 
the  bank  a  holder  in  due  course,  and  the  note  was  subject  to  the  same 
defenses  as  might  be  set  up  against  the  original  payee. 

First  National  Bank  v.  Kelgord,  91  Mo.  App.  178;  Freeman  v.  Perry, 
22  Conn.  617;  ElHs  v.  Brown,  6  Barb.  (N.  Y.)  282. 

One  taking  a  note  with  full  knowledge  that  the  consideration  had 
failed,  is  not  a  holder  in  due  course,  and  is  subject  to  the  defense  of  failure 
of  consideration. 

Washington  Trust  Co.  v.  Keyes,  88  Wash.  287. 

As  to  instruments  stolen  before  delivery,  see  notes  Section  35. 


EIGHTS    OF    HOLDER  I4l 

§  92.  When  person  not  deemed  holder  in  due  course. 

Where  an  instrument  payable  on  demand  is  negotiated  an 
unreasonable  length  of  time  after  its  issue,  the  holder  is  not 
deemed  a  holder  in  due  course. 

A  promissory  note  payable  on  demand,  with  interest,  is  a  continuing 
security;  an  indorser  remains  liable  until  an  actual  demand;  and  the  holder 
is  not  chargeable  with  neglect  for  omitting  to  make  such  demand  within 
any  particular  time. 

Merritt  v.  Todd,  23  N.  Y.  28;  Pardee  v.  Fish,  60  N.  Y.  271;  Parker  v. 
Stroud,  98  N.  Y.  379. 

No  cause  of  action  against  an  indorser  of  a  promissory  note  payable 
on  demand,  at  a  place  specified,  until  demand  is  made  in  compliance  with 
the  terms  of  the  contract  and  due  notice  of  non-payment. 

Parker  v.  Stroud,  98  N.  Y.  379. 

But  as  against  the  maker  no  demand  is  necessary  before  suit,  the 
suit  itself  being  sufficient  demand. 

Herrick  v.  Woolverton,  41  N.  Y.  581;  Wheeler  v.  Warner,  47  N.  Y. 
520;  see  Sections  26,  131. 

A  promissory  note,  payable  on  demand,  is  due  forthwith,  and  an 
action  thereon  against  the  maker  is  barred  by  the  statute  of  limitations. 

Wheeler  v.  Warner,  47  N.  Y.  519. 

Until  a  demand  is  made  at  the  place  named,  the  statute  of  limitations 
does  not  begin  to  run  in  favor  of  the  indorser. 

Parker  v.  Stroud,  98  N.  Y.  379;  Berkshire  Bank  v.  Jones,  6  Mass. 
524;  Bank  of  U.  S.  v.  Smith,  11  Wheat.  171;  Shutts  v.  Fingar,  100  N.  Y. 
539. 

Demand  by  letter  is  insufficient  to  charge  the  indorser.  The  obliga- 
tion to  make  a  demand,  implies  an  opportunity  afforded  for  performance, 
and  there  must  be  a  person  present  to  receive  payment. 

Hartford  Bank  v.  Green,  11  Iowa  476;  Dan.  Neg.  Int.  Sec.  518; 
Pierce  v.  Whitney,  29  Me.  188;  Lockwood  v.  Crawford,  18  Conn.  361. 

Reasonable  Time. — The  note  should  be  presented  for  payment  if 
not  immediately  at  least  within  a  very  short  time  and  that  the  delay  was 
such  as  to  dishonor  the  note  and  release  the  indorser. 

Crim  V.  Starkweather,  88  N.  Y.  339. 

A  check  drawn  on  Saturday  and  negotiated  the  following  Monday 
was  not  overdue. 

Asbury  v.  Taube,  151  Ky.  142. 

Where  the  holder  omits  to  make  a  demand  until  the  liability  of  the 
maker  has  been  discharged  by  the  running  of  the  Statute  of  Limitations, 
the  indorser  is  thereby  discharged. 


142  NEGOTIABLE    INSTKUMENTS    LAW 

Shutts  V.  Fingar,  100  N.  Y.  539;  Dan.  Neg.  Int.  Sec.  1306-7. 

As  between  the  drawer  and  payee  the  rule  is  that,  when  the  payee  to 
whom  the  check  is  delivered  receives  it  in  the  same  place  where  the  bank 
on  which  it  is  drawn  is  located,  he  may  preserve  recourse  against  the 
drawer  by  presenting  it  for  payment  at  any  time  before  the  close  of  banking 
hours  on  the  next  day. 

2  Dan.  Neg.  Inst.  (5  ed)  Sec.  1590;  Matlock  v.Scheuerman,  51  Or.  55; 
93  Pac.  Rep.  823. 

A  demand  note  transferred  by  payee  eighteen  months  after  its  date, 
upon  which  continuous  payments  of  monthly  interest  have  been  made  to 
payee,  is  not  overdue  at  time  of  transfer. 

McLean  v.  Bryer,  24  R.  I.  599;  83  N.  E.  861. 

What  constitutes  reasonable  time  will  vary  under  the  facts  and 
circtmistances  of  different  cases,  and  this  section  expresses  as  definite 
rule  as  could  well  be  established  or  considered  desirable,  and  where  a 
party  obtained  a  cashier's  check  from  a  bank  in  North  Carolina  and  nego- 
tiated the  same  to  a  party  residing  in  Virginia  in  five  days  thereafter, 
such  negotiation  was  within  a  reasonable  time. 

Maniifacturing  Co.  v.  Summers,  143  N.  C.  103;  Merritt  v.  Todd, 
23  N.  Y.  31;  Hussey  v.  Sutton,  160  N.  Y.  Supp.  934. 

§  93.  Notice  before  full  amount  paid.  Where  the  trans- 
feree receives  notice  of  any  infirmity  in  the  instrument  or 
defect  in  the  title  of  the  person  negotiating  the  same  before 
he  has  paid  the  full  amount  agreed  to  be  paid  therefor,  he  will 
be  deemed  a  holder  in  due  course  only  to  the  extent  of  the 
amount  theretofore  paid  by  him. 

This  is  declaratory  of  the  law,  see  Dan.  Neg.  Inst.  Sec.  798a;  Weaver  v. 
Borden,  49  N.  Y.  286;  Albany  County  Bank  v.  Peoples'  Ice  Co.,  92  App. 
Div.  (N.  Y.)  48;  Bank  of  Morehead  v.  Hemig,  220  Pa.  224. 

If  a  purchaser  of  a  note  for  value  before  maturity  has  notice  of  facts 
tending  to  show  defenses  to  the  same,  he  cannot  purposely  refrain  from 
making  inquiries  as  to  the  inception  of  the  paper,  and  at  the  same  time 
claim  to  be  a  bona  fide  purchaser. 

Walters  v.  Rock,  (N.  D.)  115  N.  W.  Rep.  512;  see  also,  Bank  of 
Morehead  v.  Hemig,  220  Pa.  224. 

The  plaintiff  discounted  three  notes  paying  therefore  one-half  of 
their  face  value,  tmder  an  agreement  that  he  was  to  retain  the  other  half 
as  security  until  the  notes  were  paid.     In  an  action  against  the  maker 


EIGHTS    OF   HOLDER  143 

of  one  of  the  notes  it  was  held  that  he  was  entitled  to  recover  one-half  of 
its  face  value  notwithstanding  the  fraud  of  the  party  who  indorsed  the 
notes  to  him. 

Rosenbaum  v.  Roth,  150  N.  Y.  Supp.  396. 


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<^^c.^Q.oa<A^    CLk<j>5. 


The  Union  Square  Bank,  which  discounted  the  foregoing  note  in 
due  course  of  business  for  the  payee  thereof  before  maturity  and  placed 
the  proceeds  of  the  discount  to  the  credit  of  the  payee  and  retained  the 
same  until  it  obtained  knowledge  that  there  was  an  entire  failure  of 
consideration  for  the  note  as  between  the  maker  and  the  payee,  could 
not,  after  bringing  an  action  against  the  maker  and  payee  to  recover 
on  the  note,  pay  the  proceeds  of  the  discount  to  the  payee  and  retain  the 
right  to  insist  that  it  is  a  holder  for  value  and  is  protected  from  any  defense 
existing  between  the  maker  and  payee. 

A  deposit  by  a  bank  of  the  proceeds  of  a  note  to  the  accoimt  of  a 
customer  is  not  of  itself  a  payment  for  the  note.  It  is  simply  a  promise 
by  the  bank  to  pay  such  proceeds  to  the  customer  by  honoring  his  checks 
or  drafts  in  the  ordinary  way  pm-sued  by  banking  institutions.  The  bank 
does  not  by  such  transaction  transfer  the  title  to  any  particular  money 
to  its  customer.  The  bank  becomes  a  debtor  to  the  customer  to  the" 
amoimt  of  such  credit. 

Albany  Co.  Bank  v.  Peoples'  Ice  Co.,  92  App.  Div.  52. 

It  is  said  by  the  Supreme  Court  of  the  United  States  in  New  York 
County  National  Bank  v.  Massey  (192  U.  S.  138,  145),  "It  cannot  be 
doubted  that,  except  imder  special  circumstances,  or  where  there  is  a 
statute  to  the  contrary,  a  deposit  of  money  upon  general  accoimt  with  a 
bank  creates  the  relation  of  debtor  and  creditor.  The  money  deposited 
becomes  a  part  of  the  general  fimd  of  the  bank,  to  be  dealt  with  by  it  as 
other  moneys,  to  be  lent  to  customers,  and  parted  with  at  the  will  of 
the  bank,  and  the  right  of  the  depositor  is  to  have  this  debt  repaid  in 
whole  or  in  part  by  honoring  checks  drawn  against  the  deposits.  It 
creates  an  ordinary  debt,  not  a  privilege  or  right  of  a  fiduciary  character. 


144  NEGOTIABLE   INSTRUMENTS    LAW 

(Bank  of  the  Republic  v.  Millard,  10  Wall.  152).  Or,  as  defined  by  Mr. 
Justice  "Wliite  in  the  case  of  Davis  v.  Elmira  Savings  Bank  (161  U.  S. 
275,  288):  'The  deposit  of  money  by  a  customer  with  his  banker  is  one 
of  loan  with  the  superadded  obligation  that  the  money  is  to  be  paid  when 
demanded  by  a  check.'     (Scammon  v.  Kimball,  92  U.  S.  362.)" 

See  also,  Aetna  Bank  v.  National  Bank,  46  N.  Y.  82;  Am.  and  Eng. 
Ency.  of  Law,  Vol.  4,  298;  Thompson  v.  Sioux  Falls  Bank,  150  U.  S.  231. 

§  94.  When  title  defective.  The  title  of  a  person  who 
negotiates  an  instrument  is  defective  within  the  meaning  of 
this  chapter  when  he  obtained  the  instrument,  or  any  sig- 
nature thereto,  by  fraud,  duress,  or  force  and  fear,  or  other 
unlawful  means,  or  for  an  illegal  consideration,  or  when  he 
negotiates  it  in  breach  of  faith,  or  under  such  circumstances 
as  amount  to  a  fraud. 

Variant.— The  Wisconsin  statute  adds  at  the  end  of  the  section  the 
following,  "and  the  title  of  such  person  is  absolutely  void  when  such 
instrument  or  signature  was  procured  from  a  person  who  did  not  know 
the  nature  of  the  instrument  and  could  not  have  obtained  such  knowledge 
by  the  use  of  ordinary  care." 


"Defective  title"  does  not  include  a  failure  of  consideration. 

Hill  V.  Dillon,  176  Mo.  App.  205,  161  S.  W.  881. 

Where  defendant  signed  a  note  without  taking  the  precaution  to 
ascertain  its  terms,  he  is  not  entitled  to  a  cancellation  on  the  ground  of 
mistake  because  the  terms  were  not  as  he  thought  they  should  be. 

Avery  v.  Powell,  174  Mo.  App.  628;  161  S.  W.  335;  Oshea  v.  Lehr, 
165  S.  W.  837. 

The  first  clause  was  considered  and  interpreted  in  Hodge  v.  Smith, 
130  Wis.  326,  110  N.  W.  192.  It  was  there  held  that  the  title  of  a  person 
w^ho  negotiates  commercial  paper  is  defective  when  he  has  obtained  any 
signature  thereto  by  fraud,  and  that  if  the  party  so  defrauded  be  relieved 
from  liability  thereon,  then  such  fraud  makes  such  paper  voidable  by  all 
the  other  persons  who  signed  it,  though  they  did  not  participate  in  and 
were  ignorant  of  such  fraudulent  conduct  at  the  time  they  signed  it. 
This  conclusion  was  reached  upon  the  ground  that  when  several  persons 
assume  such  an  obligation,  it  is  material  and  important  that  all  who  join 
as  makers  should  share  equally  in  bearing  the  burden  of  its  payment, 
and  if  through  fraud  of  the  person  holding  it,  such  equality  of  burden  is 
disturbed  and  the  burden  increased  as  to  some  of  the  persons  signing  it, 
such  fraud  renders  the  title  defective  as  to  all  of  the  persons  who  signed  it. 


EIGHTS    OF    HOLDEK  145 

Where  the  evidence  given  upon  the  trial  of  an  action  upon  a  check 
tends  to  show  that  the  holder  had  knowledge  that  the  check  was  originally- 
delivered  upon  a  condition  which  had  not  been  fulfilled,  the  question  of 
good  faith  should  be  left  to  the  jury. 

Groh's  Sons  Co.  v.  Schneider,  34  Misc.  196. 

Where  a  person  was  induced  to  sign  a  paper  containing  a  blank  form 
of  a  promissory  note,  under  a  false  statement  as  to  its  character,  the  note 
was  fraudulent,  and  only  a  bona  fide  holder  can  recover  on  the  detached 
note. 

Bank  v.  Claypool,  91  Kans.  248;  Clothier  v.  Adriance,  531;  but  see, 
Johnson  Bank  v.  Komhauser,  174  App.  Div.  136,  note  Sec.  91,  Subd.  4. 

Whatever  difference  of  opinion  may  exist  as  to  the  case  of  a  note 
diverted  or  fraudulently  put  in  circulation,  it  must  be  regarded  as  settled 
that  the  indorsee  of  a  negotiable  note  made  for  the  accommodation  of 
the  indorser,  but  without  restriction  as  to  its  use,  taking  the  note  in  good 
faith  as  collateral  security  for  an  antecedent  debt  and  without  other 
consideration,  is  entitled  to  the  position  of  a  holder  for  value. 

Grours'  Bank  v.  Penfield,  69  N.  Y.  505. 

A  transferee  of  negotiable  paper  who  takes  it  knowing  that  it  was 
executed  by  an  accommodation  maker  and  transferred  in  violation  of 
conditions  imposed  by  such  maker,  cannot  maintain  an  action  thereon 
against  him. 

Benjamin  v.  Rogers,  126  N.  Y.  60;  Kennedy  v.  Spieka,  72  Misc.  89. 

Bad  faith  in  taking  commercial  paper  does  not  necessarily  involve 
furtive  motives. 

Ward  V.  City  Trust  Co.,  192  N.  Y.  73. 

The  plaintiff  was  induced  by  fraud  to  purchase  stock  for  which  he 
paid  by  check  on  defendant  bank.  The  seller  deposited  the  check  to  his 
account  in  the  defendant  bank  and  later  drew  part  of  the  funds  and  had 
the  bank  certify  the  check  for  the  remainder.  Thereafter,  without  re- 
scinding the  contract  or  offering  to  return  the  stock,  the  plaintiff  notified 
the  bank  not  to  honor  the  seller's  check.  It  was  held  that  the  bank  was 
not  bound  to  heed  the  notice,  since  in  refusing  to  honor  it,  it  would  subject 
itself  to  an  action  for  damages. 

Barnard  v.  First  National  Bank  of  Newpoint,  111  N.  E.  451;  Adam, 
etc.  V.  Stewart,  157  Ind.  678;  Tonner  v.  Smith,  31  Neb.  107,  47  N.W.  632. 

Duress. — A  threat  by  a  husband  to  abandon  his  wife  unless  she 
signs  certain  notes,  does  not  constitute  duress,  such  as  will  relieve  her  of 
liability  on  the  notes  to  a  holder  with  notice,  where  it  does  not  appear 
that  the  wife  was  under  a  reasonable  apprehension  that  the  husband 
would  carry  out  his  threat. 


146  NEGOTIABLE    INSTRUMENTS   LAW 

Dorsey  v.  Bryans,  Ga.,  84  S.  E.  Rep.  467. 

Ordinarily,  when  no  proceedings  have  been  commenced,  threats  of 
arrest,  prosecution,  or  imprisonment,  do  not  constitute  legal  duress  to 
avoid  a  contract;  the  threats  must  be  made  under  such  circumstances 
that  they  excite  fear  of  imminent  and  immediate  imprisormient. 

Sulzner  v.  Cappeau  Co.,  234  Pa.  162;  Cornwall  v.  Anderson,  85 
Wash.  378;  Galusha  v.  Sherman,  105  Wis.  263;  Kaus  v.  Gracey,  162 
Iowa  671;  McCarthy  v.  Taniska,  80  Atl.  (Conn.)  84;  Wilbiu-  v.  Blan- 
chard,  126  Pac.  (Idaho)  1,069. 

Where  the  maker  of  the  note  is  prevented  from  exercising  his  free 
x\dll  by  reason  of  payee's  threats,  the  maker  may  repudiate  the  note  for 
duress  whether  the  threat  be  sufficient  or  insufficient  to  overcome  mind 
of  man  of  ordinary  coiirage.  In  an  action  on  a  note,  defended  on  the 
ground  of  duress,  e\ddence  as  to  the  maker's  mental  or  physical  health, 
his  condition  in  life,  his  experience,  education  and  intelligence  is  admissible. 

Cornwall  v.  Anderson,  148  Pac.  1. 

In  an  action  upon  a  check  given  by  defendant  to  pay  for  repairs  to 
his  automobile,  where  plaintiffs  by  unlawfully  withholding  possession  of 
the  machine  compelled  the  giving  of  a  check  for  a  larger  amount  than  that 
which  was  really  due,  their  good  faith  in  enforcing  a  claim,  in  fact  improper, 
will  not  affect  defendant's  right  to  set  up  duress  as  a  defense. 

Caldwell  v.  Auto  Co.,  158  S.  W.  1,030. 

Threats  which  induced  the  execution  of  a  note  by  old  and  feeble 
persons  amount  to  duress,  even  though  they  would  not  influence  ordinary 
persons. 

Anthony  v.  Brown,  214  Mass.  439;  101  N.  E.  1,056. 

Where  upon  the  threatened  insolvency  of  a  firm,  two  of  the  creditors 
and  their  attorney  went  to  the  home  of  the  aged  parents  of  one  of  the 
members  of  the  firm,  and  by  indirect  threats  to  prosecute  their  son,  induced 
them  to  sign  a  note  for  his  indebtedness,  such  note  was  void,  as  provided 
by  duress. 

Spoerer  v.  Wehland,  100  At.  Rep.  287;  Harris  v.  Carmody,  131  Mass. 
51;  Mack  v.  Prang,  79  N.  W.  (Wis.)  770;  45  L.  R.  A.  407;  Adams  v. 
National  Bank,  116  N.  Y.  606;  Bentley  v.  Robson,  76  N.  W.  (Mich.) 
691;  Ortt  v.  Schwartz,  62  Pa.  Super  Ct.  70. 


Fraud. — False  representation  made  to  the  maker  as  to  the  considera- 
tion does  not  constitute  such  fraud  as  will  invalidate  the  note.  The 
fraud  must  relate  to  the  execution  and  not  to  the  consideration  on  which 
it  is  based. 

Kellogg  V.  Hale,  190  111.  App.  15;  but  see,  Johnson  Bank  v.  Kom- 
hauser,  174  App.  Div.  (N.  Y.)  135.     (Note  Sec.  91,  Subd.  4.) 


EIGHTS    OP   HOLDEK  147 

Where  one  unable  to  read  signs  a  note  without  calHng  upon  those 
present  for  assistance,  he  cannot  question  it  on  the  theory  that  his  signa- 
ture was  obtained  through  fraud. 

National  Bank  v.  Hall,  151  N.  W.  (la.)  120. 

Where  the  maker  of  a  note  voidable  because  of  his  intoxication 
affirms  it  when  sober,  or  fails  to  disaffirm  it  within  a  reasonable  time,  it 
is  binding. 

Matz  V.  Martin,  149  N.  W.  (Minn.)  370. 

A  note  to  which  the  maker's  signatiire  is  procured  by  false  representa- 
tion as  to  the  character  of  the  paper,  he  being  ignorant  of  its  true  char- 
acter, and  having  no  intention  to  sign  such  a  paper  and  being  guilty  of 
no  negligence  in  doing  so,  is  regarded  by  some  authorities  as  void,  even 
in  the  hands  of  a  bona  fide  holder. 

Greenfield  Bank  v.  Stowell,  123  Mass.  196;  Biddeford  Bank  v.  Hill, 
102  Me.  346;  66  Atl.  721;  Keller  v.  Ruppold,  115  Wis.  636;  95  Am.  St. 
Rep.  974;  Yakima  Bank  v.  McAllister,  37  Wash.  566;  Johnson  Co.  Bank  v. 
Komhauser,  174  App.  Div.  (N.  Y.)  136. 

A  note  signed  by  one  so  intoxicated  as  to  wholly  destroy  the  rational 
faculties  of  the  mind  is  void  as  between  the  parties. 

Green  v.  Gimston,  142  N.  W.  261;  46  L.  R.  A.  212. 

Parol  evidence  is  admissible  to  prove  that  a  contract  was  procured 
by  fraud  (Barrie  v.  Miller,  104  Ga.  312;  Dowager  v.  Gibson,  5  Am.  St. 
Rep.  (Iowa)  697);  and  parol  evidence  is  admissible  for  the  purpose  of 
proving  that  a  release  was  signed  without  knowledge  of  the  contents, 
and  without  any  intention  on  the  part  of  the  signer  to  execute  an  instru- 
ment of  that  character  (Lors  v.  Accident  Assn.,  89  Wis.  19,  46  Am. 
St.  Rep.  815).  But  as  a  general  rule,  imless  fraud  or  mistake  is  shown,  a 
contract  in  writing  is  conclusively  presiimed  to  contain  the  entire  agree- 
ment in  which  all  previous  negotiations  respecting  the  subject  matter 
have  been  merged. 

Smith  V.  Vose,  194  Mass.  193;  Harris  v.  Murphy,  56  Am.  St.  Rep.  659. 

Burden  of  Proof. — Where  the  maker  of  negotiable  paper  shows  that 
it  has  been  obtained  from  him  by  fraud,  a  subsequent  transferee  must 
before  he  is  entitled  to  recover  thereon,  show  that  he  is  a  bona  fide  pur- 
chaser, or  that  he  derived  his  title  from  such  a  purchaser.  It  is  not 
sufficient  to  show  simply  that  he  purchased  it  before  maturity  and  paid 
value,  he  must  show  that  he  had  no  knowledge  or  notice  of  the  fraud. 

Vosburgh  v.  Diefendorf,  119  N.  Y.  357;  First  National  Bank  of 
C.  V.  Green,  43  N.  Y.  298;  Farmers'  and  Citizens'  National  Bank  v. 
Noxon,  45  N.  Y.  762;  Ocean  National  Bank  of  N.  Y.  City  v.  Carll,  55 
N.  Y.  440;  Wilson  v.  Rocke,  58  N.  Y.  643;  Nickerson  v.  Ruger,  76  N.  Y. 


148  NEGOTIABLE   INSTRUMENTS    LAW 

279;  Canajoharie  National  Bank  v.  D'efendorf,  123  N.  Y.  247;  Grant  v. 
Walsh,  145  N.  Y.  502;  German -Aineri can  Bank  v.  Cunningham,  97  App. 
Div.  246;  U.  N.  Bank  v.  Diefendorf,  123  N.  Y.  203;  Joy  v.  Diefendorf, 
130  N.  Y.  6;  Johnson  Co.  Saving  Bank  v.  Walker,  79  Conn.  348;  Keegan  v. 
Rock,  128  la.  39;  Hodge  v.  Sm.ith,  130  Wis.  326;  First  Nat^'onal  Bank  v. 
Wise,  172  Iowa  25. 

Knowledge  that  a  note  was  given  in  consideration  of  an  executory 
agreement  of  the  payee  which  has  not  been  performed,  will  not  deprive 
an  indorsee  of  the  character  of  a  bona  fide  holder,  unless  he  also  has 
notice  of  the  breach  of  the  agreement. 

McNight  V.  Parsons,  136  la.  300. 

The  bona  fide  holder  for  value,  who  receives  the  paper  in  the  usual 
cottrse  of  business,  is  unaffected  by  the  fact  that  it  originated  in  an  illegal 
consideration,  without  any  distinction  between  cases  of  illegality  founded 
in  moral  crime  or  turpitude,  and  those  founded  in  positive  statutory 
prohibition.  The  law  extends  th's  protection  to  negotiable  instruments 
because  it  would  seriously  embarrass  mercantile  transactions  to  expose 
the  trader  to  the  consequences  of  having  a  bill  or  note  passed  to  him 
impeached  for  some  covert  defect.  There  is,  however,  one  exception — 
that  when  a  statute  declares  the  instrutr.ent  absolutely  void,  it  gathers 
no  vitality  by  its  circulation  in  respect  to  the  parties  executing  it. 

Dan.  Neg.  Inst.  Sec.  197;  Alexander  v.  Hazelrigg,  123  Ky.  684;  Sond- 
heim  v.  Gilbert,  117  Ind.  71;  18  N.  E.  687;  Wirt  v.  Stubbefeld,  17  App. 
(D.  C.)  283;  but  see,  Johnson  Co.  Savings  Bank  v.  Komhauser,  174  App. 
Div.  (N.  Y.);  note  Section  91,  Subd.  4. 

On  section  generally,  see,  Am.  Ex.  National  Bank  of  N.  Y.  v.  N.  Y. 
Belting  Co.,  148  N.  Y.  698;  Damelman  v.  Brazier,  198  Mass.  459;  First 
National  Bank  of  Durand  v.  Shaw,  157  Mich.  194;  Real  Estate  Inv.  Co.  v. 
RusseU,  148  Pa.  496;  People's  State  Bank  v.  Miller  (Mich.)  152  N.  W.  257; 
Hynes  v.  Plastins,  45  Wash.  190;  Merchants  National  Bank  v.  Branson, 
165  N.  C.  348;  Vosburg  v.  Diefendorf,  119  N.  Y.  357. 

§  95*  What  constitutes  notice  of  defect.  To  constitute 
notice  of  an  infirmity  in  the  instrument  or  defect  in  the  title 
of  the  person  negotiating  the  same,  the  person  to  whom  it  is 
negotiated  must  have  had  actual  knowledge  of  the  infirmity 
or  defect,  or  knowledge  of  such  facts  that  his  action  in  taking 
the  instrument  amounted  to  bad  faith. 

The  purpose  of  the  statute  was  to  place  commercial  paper  on  such 
footing  that  it  would  be  fully  and  freely  accepted  without  question  in 
commercial  transactions  and  thereby  facilitate  trade,  and  with  that  pur- 


EIGHTS    OF    HOLDER  149 

pose  in  view  to  protect  the  holder  for  value  before  maturity  from  any 
defenses  that  might  exist  between  the  payor  and  payee,  unless  the  holder 
before  negotiation  had  knowledge  of  such  defense  or  infirmity  or  was  in 
possession  of  such  facts  as  would  make  his  negotiation  of  the  paper  am^ount 
to  bad  faith. 

In  some  of  the  states  it  seems  to  have  been  held  that  one  who  takes 
a  transfer  of  negotiable  paper  under  circimistances  to  put  a  reasonable 
person  on  inquiry  as  to  defenses  against  it,  is  considered  as  having  notice 
of  the  facts  which  such  inquiry  would  develop;  but  the  more  general 
trend  of  the  decisions  from  an  early  day  has  been  to  the  effect  that  mere 
ground  of  suspicion  as  to  possible  defects  in  the  title  of  the  negotiator 
or  of  the  existence  of  defenses  to  the  instrument  negotiated  is  not  the 
equivalent  of  notice  to  the  transferee,  and,  to  be  regarded  as  an  innocent 
purchaser,  he  need  not  as  a  matter  of  law  be  diligent  to  investigate  the 
circumstances  of  the  origin  of  the  paper,  though  if  the  negligence  be  of  a 
marked  or  gross  character  it  may  be  competent  to  establish  the  mala  fides 
of  the  piu-chaser.  That  which  will  charge  the  paper  in  his  hands  with 
prior  equities  and  defenses,  is  actual  or  direct  notice  of  the  facts.  Or,  in 
the  absence  of  such  notice  or  knowledge,  the  existence  to  his  notice  of 
such  facts  or  circumstances  that  his  action  in  taking  the  paper  amounts 
to  bad  faith. 

Mere  suspicious  circumstances  are  not  sufficient  to  put  a  party  upon 
inquiry,  vmless  the  circumstances  are  such  as  to  so  strongly  intimate 
a  defect  in  the  title  that  a  deduction  of  bad  faith  may  fairly  be  made. 
Gross  carelessness,  although  not  of  itself  sufficient  as  a  matter  of  law,  to 
defeat  the  title  in  a  purchaser  for  value,  constitutes  evidence  of  bad  faith. 

Canajoharie  National  Bank  v.  Diefendorf,  123  N.  Y.  191;  Am.  Ex. 
National  Bank  v.  N.  Y.  Belting  Co.,  148  N.  Y.  698;  Interboro  Brewing 
Co.,  V.  Doyle,  165  App.  Div.  (N.  Y.)  650;  Hibbs  v.  Brown,  190  N.  Y.  167; 
Baruch  v.  Buckley,  167  App.  Div.  (N.  Y.)  116;  Cole  v.  Harrison,  167  App. 
Div.  (N.  Y.)  336;  Oliner  v.  Goldenberg,  168  App.  Div.  (N.  Y.)  847; 
Hartford  National  Bank  v.  Gardner,  157  N.  Y.  Supp.  849;  Ward  v.  City 
Trust  Co.,  192  N.  Y.  61;  Eisenberg  v.  Lefkowitz,  142  App.  Div.  (N.  Y.) 
569;  Van  Slyke  v.  Rooks,  181  Mich.  88. 

No  other  rule  than  cited  above  would  work  well,  for  it  would  be 
intolerable  if  every  bank  had  to  learn  the  true  history  of  each  piece  of 
paper  presented  for  discount  before  it  could  act  with  safety. 

Chemical  National  Bank  v.  Kellogg,  183  N.  Y.  96;  Mass.  National 
Bank  v.  Snow,  187  Mass.  159;  Second  National  Bank  v.  Morgan,  165 
Pa.  199;  Goetting  v.  Day,  87  N.  Y.  Supp.  510;  Cole  v.  Harrison,  153 
N.  Y.  Supp.  200;  Cheever  v.  Pittsburgh  Ry.  Co.,  150  N.  Y.  59. 


150  NEGOTIABLE   INSTEUMENTS   LAW 

The  title  of  one  who  for  full  value  receives  a  transfer  of  negotiable 
paper  before  maturity  and  without  notice  of  any  outstanding  or  antecedent 
equities,  is  not  subject  to  be  defeated  by  proof  that  he  might  have  obtained 
such  notice  by  the  exercise  of  active  vigilance. 

State  Bank  of  Ohio  v.  Hoge,  35  N.  Y.  65;  Strickland  v.  N.  Y.  C.  & 
H.  R.  R.  R.  Co.,  88  App.  Div.  (N.  Y.)  367;  Amd  v.  Aylesworth,  145 
Iowa  185;  Setzer  v.  Deal,  135  N.  C.  428;  Bank  v.  N.  Y.  Belting  Co.,  148 
N.  Y.  705;  Jarvis  v.  Manhattan  Beach  Co.,  148  N.  Y.  652;  Davis  v.  Clark, 
85  N.  J.  L.  696;  Rice  v.  Barrington,  75  N.  J.  L.  806. 

He  has  a  right  to  assimie  that  the  relations  to  the  paper  of  every  party 
whose  name  appears  on  it  are  precisely  what  they  appear  to  be. 

Cheever  v.  Pittsburgh,  etc.  R.  R.,  150  N.  Y.  59;  Valley  Savings 
Bank  v.  Mercer,  97  Md.  459;  Massachusetts  National  Bank  v.  Snow, 
187  Mass.  163;  Bank  v.  Butler,  113  Tenn.  575;  Goodman  v.  Simmons, 
61  U.  S.  343. 

It  is  now  a  well  settled  rule  that  the  rights  of  a  holder  of  a  negotiable 
instrument  is  to  be  determined  by  the  simple  test  of  honesty  and  good 
faith,  and  not  by  speculative  issue  as  to  his  diligence  and  negligence. 

Charters  v.  Palmer,  113  App.  Div.  (N.  Y.)  108;  Second  National 
Bank  v.  Weston,  172  N.  Y.  250;  Manhattan  Savings  Inst.  v.  N.  Y.  National 
Exch.  Bank,  170  N.  Y.  58;  Weissinger  v.  Van  Buren  (Ky.)  123  S.  W.  289; 
Second  National  Bank  of  Clarion  v.  Morgan,  165  Pa.  St.  199. 

But  it  is  a  settled  rule  that  when  the  maker  of  negotiable  paper  shows 
that  it  has  been  obtained  from  him  by  fraud  and  dm"ess,  a  subsequent 
transferee  must,  before  entitled  to  recover  on  it,  show  that  he  is  a  bona 
fide  holder. 

Vosburgh  v.  Diefendorf,  119  N.  Y.  364. 

Where  the  taint  of  fraud  once  attaches  to  a  written  contract,  nego- 
tiable or  otherudse,  the  law  is  careful  to  require  every  person  who  seeks 
to  profit  by  it  to  show  that  he  comes  into  court  ^vith  clean  hands.  It  would 
be  a  departure  from  principal  to  hold  that  the  maker  must  prove  that 
the  holder  had  notice  of  the  fraud.  Whether  he  had  notice  or  not  is  a 
matter  peculiar  within  his  own  knowledge. 

Giberson  v.  JoUey,  120  Ind.  301;  (22  N.  E.  306). 

The  purchaser  of  a  note  is  a  holder  in  due  course,  though  he  only 
pays  for  it  one-third  of  its  face  value,  the  inadequacy  of  price  standing 
alone  not  being  sufficient  to  put  him  on  notice,  both  the  purchaser  and 
seller  living  in  another  state  and  neither  knowing  the  maker  of  the  note. 

Ham  V.  Merritt,  150  Ky.  11;  4  Am.  and  Eng.  Ency.  283. 

An  indorsee  of  a  negotiable  instrument  is  not  deprived  of  the  position 
as  holder  in  due  course  by  the  fact,  and  that  alone,  that  said  indorsement 
is  in  form  "without  recourse." 


EIGHTS    OF    HOLDEE  151 

Bank  of  Sampson  v.  Hatcher,  154  N.  C.  359;  Siegel  v.  Bank,  131  111. 
569;  Ferriss  v.  Tarbel,  87  Tenn.  386;  Stevenson  v.  O'Neil,  71  111.  314; 
Kelley  v.  Whitney,  45  Wis.  110;  Thorpe  v.  Mindeman,  123  Wis.  149; 
Brotherton  v.  Street,  124  Ind.  599. 

Money  held  m  fiduciary  capacity. — A  supervisor  of  the  plaintiff  town 
opened  an  account  in  the  defendant  bank  entitled,  "H.  C.  Merritt,  Super- 
visor," in  which  were  deposited  town  funds.  The  supervisor  drew  checks 
against  the  account  payable  to  his  own  order  and  wrongfully  appropriated 
the  money  to  his  own  use.  It  was  held  that  the  bank  was  not  called 
upon  to  investigate  the  purpose  of  the  supervisor  in  withdrawing  the 
money  on  checks  payable  to  his  own  order,  and  that  it  was  not  liable  to 
the  town  for  the  supervisor's  defalcations.  It  was  held  that  the  fact 
that  the  supervisor  drew  57  checks  against  the  account  to  his  own  order 
did  not  put  the  bank  upon  notice  that  he  intended  to  abuse  his  trust  and 
apply  the  money  to  his  individual  use. 

Town  of  Eastchester  v.  Mt.  Vernon  Trust  Co.,  159  N.  Y.  Supp.  289. 

In  the  above  case  the  subject  was  treated  by  Justice  Thomas.  The 
importance  warrants  the  following  extended  extract  from  the  opinion : 

"The  relation  between  the  defendant  and  Merritt  was  that  of  debtor 
and  creditor.  The  opening  of  the  accoimt  in  the  name  of  "Merritt, 
Supervisor,"  distinguished  it  from  personal  account  only  in  that  it  informed 
the  bank  that  the  moneys  did  not  belong  to  Merritt  as  an  individual,  but 
that  he  had  them  in  trust.  (National  Bank  v.  Insiirance  Co.,  104  U.  S. 
54,  26  L.  Ed.  693.)  In  this  instance  the  word  "Supervisor"  indicated 
the  depositor's  official  relation,  and  therefore  the  nature  of  the  trust; 
while,  if  the  deposit  of  the  moneys  had  been  by  "Merritt,  Trustee,"  the 
trust  itself  would  have  been  wholly  undefined,  and  the  depositary  would 
have  known  only  that  it  did  or  might  exist. 

But,  in  either  case,  the  bank  was  not  obliged,  for  the  purposes  of  pay- 
ment, to  search  for  his  authority  as  trustee.  (Manhattan  Savings  Institu- 
tion V.  N.  Y.  National  Exchange  Bank,  170  N.  Y.  58,  67,  62  N.  E.  1,079, 
88  Am.  St.  Rep.  640;  Boone  v.  Citizens'  Savings  Bank,  84  N.  Y.,  83,  86, 
38  Am.  Rep.  498.)  The  relation  of  the  parties  is  clear.  Merritt,  super- 
visor, had  deposited  moneys  which  he  officially  held.  Then  the  defendant 
owed  him  the  money,  and  could  and  should  pay  it  only  to  him.  (Perleyv. 
County  of  Muskegon,  32  Mich.  132,  136,  20  Am.  Rep.  637;  Pittsburgh  v. 
First  National  Bank,  230  Pa.  176,  181,  182,  79  Atl.  406.)  If  it  did  not 
pay  upon  proper  demand,  it  was  subject  to  action  (Citizens'  National 
Bank  v.  Importers'  and  Traders'  Bank,  119  N.  Y.  195,  23  N.  E.  540), 
and  could  not  plead  in  defense  an  interest  in  the  town  (Swartwout  v. 
Mechanics'  Bank  of  New  York,  5  Denio  555). 


152  NEGOTIABLE   INSTEUMENTS   LAW 

When  a  check  in  the  form  justified  by  the  contract  between  the 
parties  is  presented  by  a  depositor  of  trust  money,  the  debtor  owes  no 
duty  in  behalf  of  the  beneficiary  to  scrutinize  the  demand,  or  to  be  circum- 
spect, lest  its  customer  is  betrajnng  his  trust.  (Goodwin  v.  American 
National  Bank,  48  Conn.  550,  567.)  Its  solicitude  should  be  to  pay  the 
debt  to  or  upon  the  proper  order  of  the  person  to  whom  it  is  owing,  but 
not  to  suspect  its  customer's  integrity  or  to  guard  against  his  doing  wrong. 
(Lowndes  v.  City  National  Bank,  82  Conn.  8,  72  Atl.  150,  22  L.  R.  A. 
(N.  S.)  408;  Duckett  v.  Mechanics'  Bank,  86  Md.  400,  405,  38  Atl.  983, 
39  L.  R.  A.  84,  63  Am.  St.  Rep.  513.)  The  duty  of  a  bank  touching  a  trust 
fund  and  its  duty  to  be  apprehensive  for  the  conduct  of  its  depositor  is 
discussed  in  Eyrich  v.  Capital  State  Bank,  67  Miss.  60,  71-73,  6  South. 
615;  Munnerlyn  v.  Augusta  Savings  Bank,  88  Ga.  333,  14  S.  E.  554,  30 
Am.  St.  Rep.  159;  Brookhouse  v.  Union  PubHshing  Co.,  73  N.  H.  368,  373, 
62  Atl.  219,  2  L.  R.  A.  (N.  S.)  993,  111  Am.  St.  Rep.  623,  6  Ann.  Cas.  675; 
Morse  on  Banks  and  Banking,  Sec.  317.  But  I  gather  that,  in  the  absence 
of  knowledge  to  the  contrary,  a  bank  is  free  to  accept  its  depositor  as 
honest  in  his  purposed  use  of  the  money  of  which  by  check  he  demands 
payment.  Freeholders  of  Essex  v.  Newark  National  Bank,  48  N.  J.  Eq. 
53,  21  Atl.  185;  National  Bank  v.  Insurance  Co.,  104  U.  S.  54,  63,  64, 
26  L.  Ed.  693. 

In  view  of  such  attitude  of  the  depository  to  its  depositor,  although  a 
trustee,  and  to  the  trust,  it  cannot  be  said  that,  when  Merritt,  supervisor, 
presented  a  check  payable  to  his  own  order,  the  debtor  should  at  its  peril 
halt  its  creditor,  interrogate  him  as  to  his  purpose,  or  perchance  suspend 
payment  pending  investigation.  In  Lowndes  v.  National  Bank,  82  Conn. 
8,  72  Atl.  150,  22  L.  R.  A.,  408,  the  court,  after  attaching  habifity  to  the 
bank  for  devastavit  of  an  account  of  trust  moneys,  was  painstaking  to 
state:" 

"This  is  not  to  say  that  a  bank  undertakes  to  supervise  and  safeguard 
a  trust  account  therein,  or  comes  under  the  duty  of  looking  after  the 
appropriation  of  such  funds  when  withdrawn.     Such  is  not  the  law." 

And  it  decided  that  a  check  drawn  on  trust  funds  by  "Lay ton,  admin- 
istrator, to  Layton  individually,  was  not  irregular  upon  its  face." 

In  Havana  Central  R.  Co.  v.  Central  Trust  Co.,  204  Fed.  546,  123 
C.  C.  A.  72,  L.  R.  A.  715,  the  decision  was  that,  where  the  treasurer  of 
the  plaintiff  drew  a  check  signed, "Havana  Central  Railroad  Company, 
C.  W.  Van  Voorhis,  Treasurer,"  to  his  order  as  an  individual,  as  other 
checks  had  been  drawn  before,  the  bank  was  authorized  to  pay  it  without 
questioning  it.  There  an  agent  drew  a  check  in  his  own  favor  not  on  an 
account  opened  by  him,  but  against  the  account  of  his  principal,  and  even 
if  the  Court  of  Appeals  in  an  action  by  the  same  plaintiff  against  the 


EIGHTS    OF    HOLDER  153 

Knickerbocker  Trust  Company  (198  N.  Y.  422,  92  N.  E.  12,  L.  R.  A.  720) 
did  suggest  another  view,  it  must  be  kept  in  mind  that  in  the  action  at 
bar  the  depositor  was  drawing  against  his  own  accoimt,  and  no  question 
of  authority  from  the  depositor  is  involved. 

In  Allen  v.  Puritan  Trust  Co.,  211  Mass.  409,  97  N.  E.  916,  L.  R.  A. 
518,  one  Baker  drew  a  large  number  of  checks  to  his  own  order  against 
an  account  kept  by  him  under  the  name  "Estate  of  Albert  H.  Baker^ 
Wm.  L.  Baker,  Administrator,"  whereby  he  met  overdrafts  on  his  personal 
accoimt,  and  later  the  bank  carried  other  checks  to  his  credit  in  his  personal 
account,  whereupon  he  withdrew  and  misappropriated  the  money.  It 
was  found  that  as  to  the  first  class  of  checks  the  bank  was  liable,  as  it 
participated  in  the  breach  of  trust,  but  that  as  to  the  second  group  it  was 
not  liable.  The  opinion  states  (page  422  of  211  Mass.,  page  919  of  97 
N.  E.  [L.  R.  A.  518]): 

"The  principle  governing  the  defendant's  liability  is  that  a  banker 
who  knows  that  a  fund  on  deposit  with  him  is  a  trust  fund,  cannot  appro- 
priate that  fund  for  his  private  benefit,  or,  where  charged  with  notice  of 
the  conversion,  join  in  assisting  others  to  appropriate  it  for  their  private 
benefit,  without  being  liable  to  refund  the  money,  if  the  appropriation  is 
a  breach  of  the  trust." 

"From  these  authorities  it  is  clear  that  a  depositor,  although  holding 
money  in  a  fiduciary  capacity,  may  draw  it  out  of  the  bank  ad  libitum. 
The  bank  is  bound  to  honor  his  checks,  and  incurs  no  lianility  in  so  doing, 
as  long  as  it  does  not  participate  in  any  misapplication  of  funds  or  breach 
of  trust.  The  mere  payment  of  the  money  to,  or  upon  the  checks  of,  the 
depositor,  does  not  constitute  a  participation  in  an  actual  or  intended 
misappropriation  by  the  fiduciary,  although  his  conduct  or  coiu-se  of 
dealing  may  bring  to  the  notice  of  the  bank  circumstances  which  would 
enable  it  to  know  that  he  is  violating  his  trust.  Such  circimistances 
do  not  impose  upon  the  bank  the  duty,  or  give  it  the  right,  to  institute 
an  inquiry  into  the  conduct  of  its  customer,  in  order  to  protect  those 
for  whom  it  may  hold  the  fund,  but  between  whom  and  the  bank  there 
is  no  privity." 

97  Tex.  576,  80  S.  W.  606,  65  L.  R.  A.  820,  104  Am.  St.  Rep.  885. 

The  addition  of  the  word  "Trustee"  to  the  name  of  a  person  is  notice 
of  a  trust  and  calls  for  inquiry  and  examination,  and  a  person  taking  an 
assignment  of  a  note  made  payable  to  the  order  of  a  third  person  as  trustee 
is  put  upon  inquiry  as  to  all  the  terms  and  conditions  under  which  the 
note  was  executed  and  is  presumed  to  have  full  knowledge  thereof. 

Geyser  v.  Stark,  106  Fed.  558;  53  L.  R.  A.  684;  Marbury  v.  Ehlen, 
72  Md.  206;  McLeod  v.  Despain,  46  Or.  526;  Henshaw  v.  Bank,  239  111. 
515;  88  N.  E.  214. 


154  NEGOTIABLE   INSTKUMENTS   LAW 


J/tc/i^.Y/cs  JBf^j>ric 


Boswell,  as  the  agent  of  plaintiffs,  had  charge  of  certain  premises 
known  as  "Glass  Buildings";  he  deposited  the  rents  collected  to  the  credit 
of  a  bank  account  kept  in  his  name  as  "Agent  Glass  Buildings."  In 
payment  of  a  debt  which  Boswell  owed  defendant,  as  collateral  for  which 
the  latter  held  certain  securities,  he  received  a  check  on  the  bank  signed 
by  Boswell,  with  the  words  "Agt.  Glass  Buildings"  following  his  signature, 
and  on  receipt  surrendered  the  securities.  The  check  was  paid  by  the 
bank  and  charged  to  said  account.  Boswell  had  no  authority  to  so  use  the 
fund.  In  an  action  to  recover  the  amount  thereof,  there  was  no  evidence 
tending  to  raise  any  question  as  to  defendant's  good  faith,  except  such 
receipt  of  the  check.  Held,  that  the  form  of  the  check  was  sufficient  to 
indicate  to  defendant  the  existence  of  an  agency,  and  to  put  him  on  inquiry 
as  to  the  agent's  authority  to  so  use  the  money. 

Gerard  v.  McCormick,  130  N.  Y.  261;  see  also.  Carpenter  v.  Fams- 
worth,  106  Mass.  561 ;  N.  Bank  v.  Ins.  Co.,  104  U.  S.  517;  Shaw  v.  Spencer, 
100  Mass.  389. 

A  guardian  who  kept  funds  in  defendant's  bank  in  his  name  as  guard- 
ian, also  had  an  individual  account  in  the  same  bank.  He  closed  out  the 
indi\4dual  accoimt,  and  later  drew  checks  signed  in  his  individual  name, 
which  the  bank  paid  out  of  the  guardianship  account.  Held  that  the 
bank  was  liable  for  the  amount  thus  paid. 

United  States  Fidelity  Co.  v.  U.  S.  National  Bank  (Or.)  157  Pac. 
Rep.  155. 

The  guardian  might  have  negotiated  the  original  check  drawn  in 
his  favor  for  the  amount  due  his  ward,  and  deposited  the  proceeds  to  his 
private  credit  in  the  bank  cashing  it  or  in  any  other  institution  of  the  kind, 
and  the  depository,  having  no  further  knowledge,  would  be  protected  in 
paying  the  checks  drawn  against  the  deposit  and  signed  in  the  personal 
name  of  the  individual,  even  though  he  had  also  the  office  of  guardian. 
This  is  upon  the  principle  that  the  bank  is  bound  to  respond  to  the  checks 
of  the  party  wdth  whom  it  contracts  acting  in  the  character  in  which  he 
stipulates. 


EIGHTS    OF   HOLDER 


155 


Mimnerlyn  v.  Augusta  Sav.  Bank,  88  Ga.  333;  14  S.  E.  554;  Coleman  v. 
First  National  Bank,  94  Texas  605;  63  S.  W.  867;  Safe  Deposit  and  Trust 
Co.  V.  Diamond  National  Bank,  194  Pa.  334;  Batchelder  v.  Central 
National  Bank,  188  Mass.  25;  73  N.  E.  1024;  Hood  v.  Kensington  National 
Bank,  230  Pa.  508;  79  Atl.  714;  National  Bank  v.  Insurance  Co.,  104 
U.  S.  54,  64. 

Where  an  executor  deposits  the  funds  of  the  estate  in  one  bank, 
and  draws  checks  as  executor  on  such  deposit  and  deposited  the  checks 
to  his  individual  accoimt  in  another  bank,  and  out  of  the  individual 
account  paid  notes  due  by  him  to  the  second  bank,  the  second  bank  is 
liable  to  the  estate  in  the  amount  so  appropriated.  Being  put  on  notice 
the  bank  was  held  a  party  to  the  misappropriation. 

Bischofi  V.  Yorkville  Bank,  218  N.  Y.  106;  see  also  notes  in  L.  R.  A. 
1915  C,  518;  L.  R.  A.  1515  A,  715. 

Where  a  fiduciary  draws  a  check  to  his  individual  order  and  deposits 
it  elsewhere  in  his  individual  account,  and  subsequently  uses  the  proceeds 
in  breach  of  his  trust,  the  bank  receiving  such  deposit  is  not  liable  for  the 
proceeds,  in  the  absence  of  actual  knowledge  of  the  fiduciary's  misconduct 
or  of  circumstances  sufficient  to  put  it  on  inqmry. 

Havana  R.  R.  Co.  v.  Knickerbocker  Trust  Co.,  198  N.  Y.  423; 
Mills  V.  Nassau  Bank,  52  Misc.  342;  Batchelder  v.  Central  Bank,  188 
Mass.  25;  Goodwin  v.  American  National  Bank,  48  Conn.  550;  S.  and  D. 
Trust  Co.  V.  Diamond,  194  Pa.  St.  334;  Rhinehart  v.  Banking  Co.,  99 
Mo.  App.  381;  Martin  v.  Kansas  National  Bank,  66  Kan.  563. 

Where  a  check,  given  in  payment  of  an  individual  debt,  is  signed  by 
the  debtor  and  another  as  executor  of  the  estate,  the  form  of  the  check  is 
notice  to  the  payee  that  it  is  payable  from  trust  funds  and  the  collection 
of  the  check  renders  him  a  joint  tort  frasor  with  the  drawers  in  the  con- 
version of  the  amount  of  the  check  from  the  trust  fimd. 

Squire  v.  Ordemann,  194  N.  Y.  394;  and  cases  cited. 


J/^^^  ^^  J^^^^.^x-('&^t^.(L^.^y/  y^/^ 


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i/'My  /^:?^^e:^>^^ 


'tz^  _  .^^^^2^    "^^^<g  o uA>da'U 


^, 


156  NEGOTIABLE   INSTRUMENTS   LAW 

Greatest  caution  should  be  exercised  in  discounting  or  accepting 
a  note  of  an  executor,  administrator,  guardian  or  trustee.  Unless  ex- 
pressly given  authority  none  of  them  have  power  to  bind  the  estate  repre- 
sented by  them.  The  title  of  the  property  coming  into  their  hands  vests 
in  them  only  for  the  purpose  of  administration.  Such  a  person  who 
makes,  indorses  or  accepts  negotiable  paper  is  personally  liable  thereon, 
although  he  adds  to  his  signature  the  title  of  his  office.  The  foregoing 
signature,  regardless  of  the  authority  of  Knapp  to  bind  the  estate,  is  in- 
correct; the  words,  "Executor  of  Estate  of  John  Ray"  are  merely  descrip- 
tive and  are  no  more  binding  on  the  estate  than  if  it  were  signed,  Clarence 
Knapp,  Republican,  or  any  other  descriptive  word.  While  the  note 
would  in  no  way  bind  the  estate  of  John  Ray,  Clarence  Knapp  would  be 
personally  liable  to  Thomas  Atkin  for  the  amoimt  thereof.  Had  Knapp 
the  authority  to  execute  paper  the  signature  to  bind  the  estate  would  be 
"Estate  of  John  Ray,  By  Clarence  Knapp,  Executor." 

Schmittler  v.  Simon,  101  N.  Y.  554;  Connor  v.  Clark,  12  Cal.  168; 
Foster  v.  Fuller,  6  Mass.  758. 


^. ^,Ut/- 


C3n^^«'««i«i^V    <8-*twi««iCHtf 


{INDORSED) 

N.  W.  WATKINS,  TRUSTEE, 
J.  REGISTER  &  SON. 

This  note  was  given  for  the  purchase  of  property  sold  by  Watkins 
as  trustee  under  a  decree  of  the  court.  The  note  was  indorsed  by  Register 
and  Son.  Subsequently,  Watkins  wrote  above  the  name  "J.  Register  and 
Son"  the  indorsement  "N.  W.  Watkins,  Trustee."  Watkins  thereafter 
sold  the  note  through  a  broker  to  the  Third  National  Bank,  and  the 
proceeds  appropriated  by  Watkins.  In  a  suit  on  the  note  the  court  said, 
'  'It  cannot  be  read  understandingly  without  seeing  upon  its  face  that  it  is 
connected  with  a  trust  and  part  of  a  trust  fund.  It  was  the  duty  of  the 
bank,  before  purchasing  it,  to  have  made  inquiry  into  the  rights  of  the 
trustee  to  dispose  of  it.     But  this  it  wholly  failed  to  do,  and  as  it  turns 


EIGHTS    OF    HOLDEK  157 

out,  he  was  disposing  of  the  note  in  fraud  of  his  trust  and  the  bank  must 
suffer  the  consequences  of  the  risk  it  assumed." 

Third  National  Bank  v.  Lange,  51  Md.  144;  Shaw  v.  Spencer,  100 
Mass.  382. 

The  same  rule  would  apply  to  an  executor,  administrator  or  guardian. 
Kepler  v.  Hall,  64  N.  C.  60;  Wilson  v.  Becker,  52  111.  346;  Thompson  v. 
Brown,  43  Ind.  206. 

Corporation  paper. — It  seems  the  general  rule  that  one  who  receives 
from  an  officer  of  a  corporation  its  notes  or  securities  in  payment  of  or  as 
security  for  a  personal  debt  of  the  officer,  does  so  at  his  peril.  Prima 
facie  the  act  is  unlawful  and  unless  actually  authorized,  the  purchaser 
will  be  deemed  to  have  taken  them  with  knowledge  of  the  rights  of  the 
corporation. 

Wilson  V.  Metropolitan  Ry.  Co.,  120  N.  Y.  145;  Smith  v.  Weston, 
159  N.  Y.  200;  Cohnfeld  v.  Tannenbaum,  176  N.  Y.;  Black  v.  Bank  of 
Westchester,  96  Md.  403;  Dan.  Neg.  Int.  Sec.  395;  Kipp  v.  Smith,  137 
Wis.  234;  Park  Hotel  Co.  v.  Fourth  National  Bank,  86  Fed.  742;  West 
St.  L.  Bank  v.  Shawnee  Bank,  95  U.  S.  557;  Henderson  v.  Koenig,  192 
Mo.  709;  Reynolds  v.  Gerdelman,  170  S.  W.  1153. 

A  corporation  having  either  an  express  or  implied  power  to  issue 
negotiable  paper  is  presimied  to  act  within  the  scope  of  such  power,  and 
hence  there  is  a  presumption  in  favor  of  the  validity  of  negotiable  paper 
issued  pursuant  to  such  power. 

Cox  V.  North  Brew.  Co.,  245  Pa.  St.  418;  Bird  v.  Daggert,  97  Mass. 
494;  Jefferson  Bank  v.  Chapman,  122  Term.  415. 

Where  the  president  of  a  corporation  procured  a  check  payable  to 
its  order,  and  having  indorsed  it  in  the  corporate  name  by  himself  as 
president,  and  deHvered  it  to  the  bank  in  payment  of  a  personal  loan,  the 
form  of  the  check  was  notice  to  the  bank  that  such  president  was  using 
the  property  of  the  corporation  to  pay  a  personal  debt  of  himself  in  appa- 
rent violation  of  its  rights. 

Ward  V.  City  Trust  Co.,  192  N.  Y.  61;  R.  and  C.  Turnpike  Co.  v. 
Paviour,  164  N.  Y.  281;  Gerard  v.  McCormick,  130  N.  Y.  264;  National 
Park  Bank  v.  G.  A.  M.  W.  and  Co.,  116  N.  Y.  1281 ;  Hathaway  v.  County 
of  Delaware,  185  N.  Y.  368;  Newman  v.  Newman,  160  App.  Div.  331. 

As  to  where  a  corporation  officer  draws  a  corporation  check  in  his 
own  favor  and  deposits  same  in  a  different  bank  than  on  which  it  was 
drawn,  see,  Havana  C.  R.  R.  Co.  v.  Knickerbocker  Trust  Co.,  198  N.  Y, 
422. 


158  NEGOTIABLE   INSTRUMENTS   LAW 

BuPrALO.  N.Y.   (S^CTa     /  191  'f  wo. /A^ 

I^aisufacturers&TradersNationaiBank  c. 

.Dollars 


<^//  -^l^^ft^jL^J 


HARTMAN  COMPANY 

FRANK  A.  UMSTED,  Pres. 

FRANK  A.  UMSTED 

A  person  accepting  or  a  bank  paying  the  above  check  would  do  so 
at  his  or  its  peril.  The  face  of  the  note  shows  it  payable  to  Hartman 
Company,  and  the  indorsement  "Hartman  Company,  Frank  A.  Umsted, 
Pres."  appears  regular  if  by  a  resolution  or  by-laws  Umsted  was  the 
person  authorized  to  indorse  the  corporation  paper.  If  after  such  indorse- 
ment the  check  was  deposited  to  the  credit  of  "Hartman  Company,"  or 
if  Umsted  had  authority  (which  authority  was  filed  with  the  bank)  to 
draw  the  cash  represented  by  the  check,  the  bank  would  not  be  liable. 
Without  such  authority,  however,  the  bank  would  be  acting  at  its  peril 
in  paying  to  Umsted  the  cash  on  such  indorsement,  or  by  crediting  the 
amount  to  his  personal  account.  The  same  would  be  true  to  any  other 
person  to  whom  Umsted  might  negotiate  it.  The  form  of  the  check  was 
notice  to  the  bank  that  Umsted  was  using  the  property  of  the  corporation 
of  which  he  was  president  to  pay  the  personal  debt  of  himself. 

Ward  V.  City  Trust  Co.,  192  N.  Y.  69;  R.  and  C.  Turnpike  Co.  v. 
Paviour,  164  N.  Y.,  281;  Hathaway  v.  County  of  Delaware,  185  N.  Y. 
368-372. 

The  effect  of  such  notice  was  to  put  the  bank  upon  inquiry.  The 
presumption  arising  from  the  face  of  the  check  was  that  it  belonged  to 
the  Hartman  Company,  and  that  its  president  had  no  right  to  appropriate 
to  his  own  use  or  with  which  to  pay  his  personal  debt.  The  purpose  of 
the  law  in  exacting  inquiry  under  such  circumstances  is  to  see  whether 
the  apparent  situation  is  the  actual  situation,  or  in  other  words  to  learn 
whether  facts  exist  to  rebut  the  presumption. 


RIGHTS   OF   HOLDER 


159 


l.omsvmx»gy^  y^r^i^'^yf'^j:^. — IM^ 


The  LomsviixE  Trust  C 

a  21*52  G 

(/iVZ)0i?5£P) 

LAKE  ONTARIO  WATER  CO. 

By  J.  C.  CLARK,  TREASURER, 

J.  C.  CLARK. 

In  the  above  illustration  Leo  Pierce  gave  his  check  to  the  Lake 
Ontario  Water  Company,  a  corporation.  The  check  was  indorsed  in 
proper  form  by  the  corporation,  and  further  indorsed  by  J.  C.  Clark  in 
his  individual  capacity,  who  deposited  the  amotmt  to  his  personal  account. 
At  the  time  of  the  transaction  Clark  as  treasiirer  of  the  corporation  had 
been  authorized  by  a  resolution  of  its  board  of  directors  "to  take  charge 
of  all  the  business  and  property  of  the  company,  and  to  make  and  sign  all 
checks,  notes  and  other  obligations  of  the  corporation."  There  was  no 
other  resolution  or  by-law  authorizing  the  use  of  its  money  or  assets  to 
pay  other  than  corporate  obligations.  The  bank  in  crediting  this  check 
to  the  personal  account  of  Clark  became  liable  to  the  Lake  Ontario  Water 
Company  for  the  full  amount.  The  form  of  the  check  was  notice  to  the 
bank  that  Clark  wa?  using  the  property  of  the  corporation  of  which  he 
was  treasurer  for  his  personal  use  in  apparent  violation  of  his  rights. 

Ward  v.  City  Trust  Co.,  192  N.  Y.  63;  Rochester  and  C.  T.  Co.  v. 
Pavior,  164  N.  Y.  281 ;  Gerard  v.  McCormick,  130  N.  Y.  261 ;  Hathaway  v. 
County  of  Delaware;  Matter  of  Haas  Co.,  131  Fed.  Rep.  232;  Matter  of 
Mills,  126  Fed.  Rep.  1011;  Rankin  v.  C.  National  Bank,  188  U.  S.  557; 
S.  G.  T.  R.  Co.  V.  Graver,  45  Penn.  St.  386. 

The  bank  was  required  as  a  matter  of  law  to  make  inquiry  as  to  the 
right  of  Clark  appropriating  the  check  to  his  use,  and  inquiry  from  Clark 
himself  would  not  justify  the  bank,  whose  first  inquiry  would  be  to  have 
called  for  a  resolution  of  the  board  of  directors  authorizing  such  use  of 
the  check.  But  such  dangerous  power  cannot  be  conferred  unless  the 
intention  is  expressed  in  utmost  clearness,  and  if  such  power  is  intended 
to  be  given  it  must  be  expressed  in  language  so  plain  that  no  other  inter- 
pretation can  rationally  be  given  it,  for  it  is  against  the  general  law  of 


160  NEGOTIABLE   INSTRUMENTS   LAW 

reason  that  an  agent  should  be  intrusted  with  power  to  act  for  his  principal 
and  for  himself  at  the  same  time. 

Bank  of  New  York  v.  National  Banking  Assn.,  143  N.  Y.  559,  564; 
National  Trust  Co.  v.  Miller,  33  N.  J.  155;  Germania  Tnnt  Co.  v.  Boyn- 
ton,  71  Fed.  Rep.  797. 

In  view  of  the  decisions  of  the  courts  and  the  enormous  losses 
sustained,  some  banks,  for  their  protection  and  to  guard  against  mistakes 
of  their  clerks,  require  the  adoption  of  a  resolution  by  the  board  of 
directors  of  a  corporation  with  whom  they  have  accounts  in  the  form 
as  follows: 

FORM  OF  RESOLUTION  OF  CORPORATION  IN  OPENING  BANK 

ACCOUNT 

To  the Bank 

of 

We  hereby  CERTIFY  that  the  following  is  a  true  and  correct  copy  of 
a  Resolution  duly  adopted  at  a  meeting  of  the  Board  of  Directors  of  the 

Company,  held  at 

on  the 

day  of 1917J  ^  quorum  then  being  present: 

"RESOLVED:  that  the  funds  of  this  Company  be  deposited  in 

Bank 

of ,  and  be  subject  to  be  withdrawn 

upon  the  check,  draft,  note  or  order  of  the  Company,  signed  by  any  one  of 
the  following  officers  to  wit: 

President 

Vice-President 

Treasurer 

Secretary 

and  the  said  Bank  is  hereby  authorized  to  pay  such  checks,  drafts,  notes  or 
orders ,  and  also  to  receive  the  same  for  the  credit  of  or  in  payment  from  the 
payee  or  any  other  holder  when  so  signed,  without  inquiry  as  to  the  circum- 
stances of  their  issue  or  the  disposition  of  their  proceeds,  whether  drawn  to 
the  individual  order  of,  or  tendered  in  payment  of  individual  obligations  of, 
the  officers  above  named,  or  other  officers  of  this  Company,  or  otherwise." 

President 

Secretary 

Dated  at 

1917- 

{Impress  with  corporate  seal) 


EIGHTS   OF   HOLDER  161 

The  foregoing  resolution  should  be  adopted  by  the  board  of  directors 
at  a  meeting  with  a  quorum  present.  The  legal  effect  of  investing  the 
management  of  the  affairs  of  a  corporation  in  its  board  of  directors  is  to 
invest  the  directors  with  such  government  and  management  as  a  board 
and  not  otherwise.  The  separate  action  individually  of  the  directors  is 
not  the  action  of  the  constituted  body  of  men  clothed  with  corporate 
powers  (17  Am.  &  Eng.  Ency.  of  Law,  83),  and  the  resolution  to  be 
effective  and  a  protection  of  a  bank  relying  on  it  should  be  adopted  at  a 
regular  meeting  with  a  quorum  present.  A  knowledge  of  the  law  will 
convince  any  reasonable  person  the  reasonableness  of  a  bank  demanding 
such  protection.  The  bank  dealing  with  a  corporation  has  no  control 
of  the  personnel  of  its  officers  and  agents,  and  it  would  seem  reasonable 
that  the  stock  holders  of  a  corporation  should  stand  the  responsibility 
of  acts  of  its  officers  and  agents  selected  by  them — and  not  require  the 
bank  to  inquire  as  to  their  authority  in  every  transaction,  requiring  time 
and  in  some  cases  embarassment. 

Payment  of  personal  debts  of  a  partner  or  officer  of  a  corporation 
with  corporation  paper. 


JW^^^^J^y^>^^/>-^^  ^^/  '^-. 


WOOWWOWTH    BUII.OIMO- 


fl%^4^f/4^^-^/^^^.^J^^;t^j^C^ 


&  Mfg.  Coi»pM(7 


Qs^^y    V     C^ :  r^y^  Jn^^M^ 


It  is  a  general  rule  that  where  one  who  receives  from  an  officer  of  a 
corporation  its  check  or  note  in  payment  of  or  as  security  for  a  personal 
debt  of  the  officer,  does  so  at  his  peril.  Prima  facie  the  act  is  unlawful, 
and  imless  actually  authorized,  the  purchaser  will  be  deemed  to  have  taken 
them'with  knowledge  of  the  rights  of  the  corporation. 

Wilson  V.  Met.  Ry.  Co.  120  N.  Y.  145. 

"It  is  well  settled  that  one  partner  cannot  give  a  partnership  check, 
without  the  assent  of  the  other  partners,  in  payment  of  his  individual 


162  NEGOTIABLE   INSTRUMENTS   LAW 

debt.  Rovers  v.  Betterton,  93  Tenn.  630,  27  S.  W.  1017,  and  authorities 
cited.  So  it  has  been  held  by  the  Supreme  Court  of  the  United  States  that 
one  partner  cannot  use  the  partnership  funds  to  pay  his  pre-existing  debts 
without  the  consent,  express  or  impHed,  of  the  other  partners,  and  in  such 
case  a  partnership  creditor  may  recover  from  the  party  receiving  the  fund, 
although  the  party  did  not  know  that  he  had  received  partnership  funds. 
Rogers  v.  Batchelor,  12  Pet.  221;  Dob  v.  Halsey,  16  Johns.  34." 

The  effect  of  notice  referred  to  in  cases  cited  is  to  put  the  bank  upon 
inquiry  to  see  if  it  was  about  to  accept  money  from  one  whom  it  did  not 
belong  in  payment  of  his  own  claim,  and  the  presimiption  arising  from  the 
face  of  the  check  was  that  it  belonged  to  the  corporation  and  that  its  officer 
had  no  right  to  use  it  to  pay  his  personal  debt. 

Ward  V.  City  Trust  Co.,  192  N.  Y.  61;  Gerard  v.  McCormick,  130 
N.  Y.  261;  First  National  Bank  of  Paterson  v.  National  Broadway  Bank, 
156  N.  Y.  459;  Angle  v.  N.  W.  Insurance  Co.,  92  U.  S.  312. 

If  the  president  of  a  corporation  who  is  authorized  to  make  the 
corporation  notes,  makes  one  regular  in  form,  attested  by  its  secretary, 
payable  to  the  order  of  a  third  person,  who  in  fact  had  no  interest  therein, 
and  the  note  is  indorsed  by  the  nominal  payee  to  a  firm  of  which  the 
president  is  a  member,  or  in  blank  and  then  indorsed  by  the  firm,  and  the 
president  thereafter  wrongfully  delivers  the  note,  for  value,  before  ma- 
turity, to  a  stranger  having  no  actual  knowledge  or  notice  of  defect  in 
the  title,  the  fact  that  the  corporate  note  bears  upon  its  face  the  signature, 
as  president,  of  the  party  dealing  with  it,  is  not  sufficient  to  put  the 
transferee  upon  inquiry  and  does  not  deprive  him  as  a  matter  of  law  of 
the  character  of  a  bona  fide  purchaser. 

Cheever  v.  Pittsburgh  R.  R.  Co.,  159  N.  Y.  60. 

In  Reynolds  Elevator  Co.  v.  Merchants  National  Bank,  55  App. 
Div.  1,  a  bank  received  checks  drawn  by  the  president  of  a  corporation 
against  the  corporation  accotmt  in  payment  of  the  president's  individual 
debt.  The  bank  was  held  liable  to  the  corporation  for  the  amotmt  of  the 
checks,  the  court  saying  in  the  opinion: 

"It  is  well  settled  that  a  person  who  knowingly  receives  from  an  agent 
the  money  or  property  of  a  principal  in  payment  of  the  agent's  debt,  does 
so  at  his  peril;  and  if  the  agent  acted  without  authority,  the  principal 
may,  on  proof  of  these  facts,  recover  his  money." 

Manhattan  Co.  v.  National  Bank,  133  Fed.  76. 


RIGHTS    OF   HOLDER  163 

Plaintiff's  president  having  without  authority  indorsed  checks 
payable  to  it  with  its  name,  and  thereunder  with  his  own  name,  both  in 
his  handwriting,  and  deposited  them  to  the  credit  of  his  individual  account 
with  defendant  bank,  and  defendant  having  collected  them  and  paid  out 
the  proceeds  on  the  personal  checks  of  such  president,  defendant  became 
liable  to  plaintiff,  at  its  election,  either  in  conversion  for  the  value  of  the 
checks,  or  for  the  proceeds  thereof  as  for  many  had  and  received. 

Moch  v.  Security  Bank,  163  N.  Y.  Supp.  277. 

In  the  foregoing  case  the  court  said:  "The  uncontro verted  evidence 
is  in  accordance  with  the  allegations  of  the  complaint,  that  the  checks 
were  indorsed,  so  deposited  to  Moch's  credit,  collected,  and  the  proceeds 
paid  out  without  authority;  and  since  there  was  no  representation  by  the 
corporation  concerning  Moch's  authority  by  which  the  bank  was  misled 
or  the  plaintiff  is  estopped  from  claiming  ownership,  no  title  passed,  and 
the  bank  in  receiving  and  exercising  dominion  over  the  checks  by  parting 
with  them  and  collecting  the  proceeds,  converted  the  checks  and  became 
liable  to  the  plaintiff,  at  its  election,  either  in  conversion  for  the  value  of 
the  checks  or  for  the  proceeds  thereof  as  for  money  had  and  received, 
without  regard  to  any  question  of  good  faith,  or  of  notice  or  knowledge 
or  duty  of  inquiry,  notwithstanding  the  fact  that  it  may  have  parted  with 
the  money  in  good  faith  and  in  the  belief  that  Moch  was  authorized  to 
indorse  the  checks  and  to  receive  the  proceeds." 

Robinson  v.  Chemical  National  Bank,  86  N.  Y.  404;  Comstock  v. 
Hier  et  al.,  73  N.  Y.  269,  29  Am.  Rep.  142;  Porges  v.  U.  S.  Mortgage  and 
Trust  Co.,  203  N.  Y.  181,  96  N.  E.  424;  Silver  v.  Krellman,  89  App.  Div. 
363,  85  N.  Y.  Supp.  945;  Talbot  v.  Bank  of  Rochester,  1  Hill  295;  Bur- 
stein  v.  People's  Trust  Co.,  143  App.  Div.  165,  127  N.  Y.  Supp.  1092; 
Schmidt  v.  Garfield  National  Bank,  64  Hun.  298,  19  N.  Y.  Supp.  252, 
affirmed  in  138  N.  Y.  631,  33  N.  E.  1084;  see  also,  Gerard  et  al.  v.  Mc- 
Cormick,  130  N.  Y.  261,  29  N.  E.  115,  14  L.  R.  A.  234;  Cobb  v.  Dows, 
10  N.  Y.  335. 

Partnership  paper. — The  fact  that  a  promissory  note  signed  by  an 
individual,  who  is  a  member  of  a  partnership,  is  made  payable  to  his  own 
order,  and  is  indorsed  by  him  first  in  his  own  name  and  then  in  the  name 
of  the  firm,  does  not  give  notice  to  a  person  who  takes  the  note  for  value, 
that  the  indorsement  in  the  name  of  the  firm  was  for  the  accommodation 
of  the  maker  or  that  the  maker  is  to  receive  the  proceeds  of  the  note  for 
his  private  use. 

Feigenspan  v.  McDonnell,  201  Mass.  342. 


164  NEGOTIABLE   INSTRUMENTS   LAW 


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MOON  &  CLARK 
WILLIAM  S.  MOON 

Where  a  partner  makes  a  promissory  note  in  his  own  name,  payable 
to  the  order  of  the  firm,  indorses  the  name  of  the  firm  on  the  note,  and 
requests  a  bank  to  discoimt  the  note  and  place  the  proceeds  of  his  discoimt 
to  his  personal  credit  on  the  books  of  the  bank,  the  bank  has  notice  of  such 
irregiilarity  as  imposes  on  it  the  duty  of  inqmry  as  to  whether  the  maker 
had  authority  from  the  firm  to  indorse  the  note  with  the  firm  name  and 
procure  its  discoimt  for  his  personal  use. 

The  fact  that  a  firm  note  is  given  by  one  of  the  partners  without  the 
knowledge  or  consent  of  the  other  for  goods  sold  to  him  personally  is 
presimiptive  evidence  of  want  of  authority  to  bind  the  other  members 
of  the  firm,  and  if  the  person  taking  knows  the  fact  at  the  time,  he  is 
chargeable  with  notice  of  such  want  of  authority. 

Union  N.  &  B.  Co.  v.  Doherty,  20  Misc.  23. 

The  same  rule  applies  where  an  agent  pays  a  personal  debt  with  a 
check  signed  by  him  as  agent. 

Coffin  V.  Tevis,  164  App.  Div.  (N.  Y.)  323;  Cox  v.  Northampton 
Brewing  Co.,  245  Pa.  St.  418. 

A  bank,  which  permits  an  administrator  to  deposit  estate  funds  to 
the  credit  of  his  personal  account,  is  not  liable  to  the  beneficial  owners 
of  the  funds,  where  they  are  misappropriated  by  the  administrator  in  the 
absence  of  knowledge  on  the  part  of  the  bank  that  such  misappropriation 
was  taking  place.  But  if  the  bank,  with  the  knowledge  of  the  trust  char- 
acter of  the  fimds,  applies  them  to  the  personal  debt,  due  from  the  admin- 
istrator to  the  bank,  or  knowingly  assists  or  participates  in  the  misap- 
plication of  such  funds,  it  will  be  liable  for  the  amount  so  misapplied. 

Miami  Co.  Bank  v.  Peru  Trust  Co.  (Ind.)  112  N.  E.  40. 


EIGHTS    OF   HOLDER 


165 


Also  where  an  executor  (or  trustee)  uses  trust  funds  for  a  similar 
purpose. 

Bischoff  V.  Yorkville  Bank,  170  App.  Div.  (N.  Y.)  681;  Squire  v. 
Ordemann,  194  N.  Y.  394;  87  N.  E.  435;  Cohnfeld  v.  Tanenbaum,  176 
N.  Y.  126;  68  N.  E.  141;  Ward  v.  City  Trust  Co.,  192  N.  Y.  61;  84  N.  E. 
585;  Union  Stockyards  Bank  v.  Gillespie,  137  U.  S.  411;  Shaw  v.  Spencer, 
100  Mass.  382;  x\llen  v.  Puritan  Trust  Co.,  211  Mass.  409;  Brookhouse  v. 
Union  Publishing  Co.,  73  N.  H.  368;  Havana  C.  R.  R.  Co.  v.  Knicker- 
bocker Trust  Co.,  198  N.  Y.  422;  Ford  v.  Brown,  114  Tenn.  467;  Swift  v. 
Smith,  102  U.  S.  442. 

The  executor  of  an  estate,  who  kept  an  account  in  his  name  as  executor 
in  another  bank,  drew  checks  thereon,  payable  to  the  order  of  defendant 
bank,  which  he  deposited  to  his  personal  accoimt  in  the  defendant  bank. 
He  repaid  loans  made  to  him  by  the  defendant  with  checks  drawn  against 
the  accoimt  in  the  defendant  bank,  and  also  drew  checks  against  such 
accoimt  to  pay  personal  obHgations  to  others.  It  was  held  that  the 
bank  was  chargeable  with  knowledge  that  the  executor  was  making  an 
imauthorized  use  of  the  funds  of  the  estate,  and  that  the  bank  was  respon- 
sible to  the  estate  for  the  amount  misappropriated  after  the  time  the 
executor  used  the  fimds  to  satisfy  his  individual  debt  to  the  bank. 

Bischoff  V.  Yorkville  Bank,  218  N.  Y.  106;  112  N.  E.  759. 

Note  of  insane  person. 


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If  at  the  time  of  the  making  and  negotiating  the  foregoing  note 
Watkins  was  a  limatic,  whose  lunacy  had  been  judicially  determined 
and  for  whom  a  committee  had  been  appointed,  he  is  incapable  of  entering 
into  any  contract,  and  any  contract  which  he  may  assume  to  make  while 
in  that  situation  is  absolutely  void. 

Hughes  V.  Jones,  116  N.  Y.  67;  Carter  v.  Beckwith,  128  N.  Y.  316. 

The  fact  that  for  the  time  being,  he  so  deported  himself  as  to  conceal 
his  limacy  cannot  alter  his  rights  to  be  protected  against  his  own  misfor- 


166  NEGOTIABLE   INSTRUMENTS   LAW 

tune,  and  although  the  bank  dealing  with  him  may  be  ignorant  of  his 
condition  it  is  its  misfortune  and  it  will  not  be  allowed  to  throw  it  upon 
one  already  helpless. 

Burden  of  Proof. — In  an  action  the  burden  of  proof  is  on  the  defen- 
dant, the  notes  making  out  a  prima  facie  case  for  the  plaintiff. 

Pratt  V.  Rounds,  160  Ky.  359. 

For  cases  on  subject  generally,  see,  Felebronn  v.  Hayward,  190 
Mass.  481;  PhilHps  v.  Eldridge,  221  Mass.  104;  Matlock  v.  Scheuer- 
man,  51  Or.  51;  Silverstone  v.  Assurance  Co.,  176  Mich.  525;  Keegan 
V.  Rock,  128  la.  39;  102  N.  W.  805;  Anthony  v.  Association,  162 
Mass.  354;  Walters  v.  Rock,  (N.  D.)  115  N.  W.  511;  Loundes  v.  City 
National  Bank,  82  Conn.  8;  Duckett  v.  National  Bank,  86  Md.  403; 
Ward  V.  City  Trust  Co.,  192  N.  Y.  61 ;  American  National  Bank  v.  Fidelity 
and  Deposit  Co.,  129  Ga.  126;  Bishoff  v.  Yorkville  Bank,  170  App.  Div. 
(N.  Y.)  679;  Union  Stock  Yards  Bank  v.  Gillispie,  137  U.  S.  411;  National 
Bank  v.  Insurance  Co.,  104  U.  S.  54;  Roco  v.  Byrne,  145  N.  Y.  182; 
Squire  v.  Ordemann,  194  N.  Y.  394;  Allen  v.  Puritan  Trust  Co.,  211  Mass. 
409;  Safe  Deposit  Trust  Co.  v.  Bank,  194  Pa.  334;  Batchelder  v.  Central 
National  Bank,  188  Mass.  25;  U.  S.  FideHty  Co.  v.  Home  Savings  Bank, 
(W.  Va.)  88  S.  E.  109;  Havana  C.  R.  R.  Co.  v.  Knickerbocker  Trust  Co., 
198  N.  Y.  422. 

§  96.  Rights  of  holder  in  due  course.  A  holder  in  due 
course  holds  the  instrument  free  from  any  defect  of  title  of 
prior  parties  and  free  from  defenses  available  to  prior  parties 
among  themselves,  and  may  enforce  payment  of  the  instru- 
ment for  the  full  amount  thereof  against  all  parties  liable 
thereon. 

Variant. — The  IlHnois  statute  after  the  word  "themselves"  adds 
"except  the  defect  and  defense  specified"  in  certain  acts  relating  to  fraud 
and  gambling.  The  Wisconsin  statute  adds  to  the  end  of  the  section  the 
following:  "Except  as  provided  in  Sections  1944  and  1945  of  these  statutes, 
relating  to  insurance  premiums,  and  also  in  cases  where  the  title  of  the 
person  negotiating  such  instrument  is  void  under  the  provision  of  Sections 
1676-25  of  this  act." 


There  is  a  conflict  of  opinion  among  the  courts  of  the  different  states 
as  to  the  interpretation  of  this  section  as  to  paper  made  in  violation  of 
statute,  more  particularly  relating  to  those  issued  for  a  gambling  debt 
and  those  tainted  with  usury.  Some  of  the  courts  basing  their  inter- 
pretation on  the  requirement  of  business  and  others  on  the  moral  ground. 


RIGHTS   OF   HOLDER  167 

Common  Law  Rule. — Prior  to  the  enactment  of  the  Negotiable 
Instrument  Law,  the  general  rule  in  New  York  was  that  a  note  void  in 
its  inception  for  usury  continues  void  forever,  whatever  its  subsequent 
history  may  be.  It  is  void  in  the  hands  of  an  innocent  holder  for  value, 
as  it  was  in  the  hands  of  those  who  made  the  usurious  contract.  No 
validity  can  be  given  to  it  by  sale  or  exchange,  because  that  which  the 
statute  has  declared  void  caimot  be  made  valid  by  passing  through  the 
channels  of  trade. 

Clafflin  V.  Boorum,  122  N.  Y.  388;  Miller  v.  Zimmer,  111  N.  Y. 
441-4;  Eastman  v.  Shaw,  65  N.  Y.  522;  Oneida  Bank  v.  Ontario  Bank, 
21  N.  Y.  490;  Sabine  v.  Paine,  166  App.  Div.  (N.  Y.)  9. 

N.  Y.  Rule. — Since  the  enactment  of  the  law,  however,  a  different 
rule  has  been  adopted  in  Schlessinger  v.  Kelly,  114  App.  Div.  (N.  Y.)  554. 
In  a  concurring  opinion  Justice  Laughlin  said:  "I  think  that  the  purpose 
of  the  commission  in  preparing  the  draft  of  the  Negotiable  Instrument 
Law  and  the  various  Legislatures  in  enacting  it,  will  be  thwarted  if  Section 
96  is  to  receive  the  construction  that  even  against  a  bona  fide  holder  in 
due  course  for  value  the  maker  of  the  note  may  successfully  defend  upon 
the  ground  that  in  the  inception  of  the  note  some  local  law  was  violated. 
The  force  and  effect  of  the  statutes  against  usury  will  not  be  seriously 
impaired  by  the  construction  which  I  think  should  be  given  to  the  Nego- 
tiable Instrument  Law.  The  usury  laws  remain  in  full  force,  but  to 
facilitate  the  free  circulation  of  negotiable  paper  by  protecting  holders 
thereof  in  due  course  for  value  in  their  right  to  enforce  the  same,  the 
usury  laws  are  to  that  extent  superseded  by  Section  96  of  the  Negotiable 
Instrument  Law.  Of  course  it  was  perfectly  competent  for  the  Legislature 
to  do  this.  The  only  question  is  whether  or  not  it  so  intended,  and  I  am 
of  the  opinion  that  it  did." 

See  also,  Klar  v.  Kostink,  65  Misc.  199. 

Promissory  notes  void  for  usury  as  between  the  original  parties  are 
nevertheless  valid  and  enforceable  when  discounted  by  a  state  bank  for 
value  before  matiuity  in  due  course  of  business  without  notice  of  their 
usurious  inception. 

Federal  Bank  of  N.  Y.  v  Gilhooly,  189  N.  Y.  1,  and  cases  cited; 
Schlessinger  v  Kelly,  114  App.  Div.  (N.  Y.)  546. 

National  and  state  banks  are  entitled  to  protection  in  the  purchase 
of  negotiable  paper  in  so  far  as  the  officers  of  such  bank  act  in  good  faith, 
and  not  where  they  knowingly  and  intentionally  join  with  the  wrongdoers 
in  an  attempt  to  evade  the  laws.  Where  therefore,  a  bank  discounts 
promissory  notes  which  are  void  for  usury,  with  full  knowledge  of  the 
payment  of  an  usurious  rate  of  interest  thereon,  such  usury  may  be 


168  NEGOTIABLE   INSTRUMENTS   LAW 

pleaded  as  a  defense  to  an  action  on  the  notes,  and  the  provisions  of  the 
Banking  Law  (Chap.  310,  Sec.  1,  Laws  of  1900),  modifying  for  the  benefit 
of  banking  institutions  the  general  statutes  in  relation  to  usury,  have  no 
application. 

Federal  Bank  of  N.  Y.  v.  Lehmaier,  191  N.  Y.  69. 

The  purpose  of  the  Legislature  in  enacting  this  provision  to  make  a 
radical  change  in  the  law  of  this  state  (N.  Y.)  affecting  negotiable  paper, 
and  the  law  now  is  that  a  boua  fide  holder  in  due  course  holds  the  note 
free  from  any  taint  of  usury. 

Klaw  v.  Kostink,  65  Misc.  (N.  Y.)  201. 

The  question  as  to  whether  this  section  supersedes,  as  to  bona  fide 
holders  in  due  course  for  value,  local  laws  declaring  negotiable  paper 
tainted  with  usury  null  and  void  was  fully  discussed  in  17  App.  Cas. 
D.  C.  283.  In  that  case  Alvey,  Ch.  J.  dehvering  the  opinion  of  the  court 
in  which  this  section  was  in  issue  said,  "We  know,  moreover,  that  the 
great  and  leading  object  of  the  act  has  been  to  establish  a  uniform  system 
of  law  to  govern  negotiable  instruments  wherever  they  might  be  circu- 
lated or  negotiated.  The  great  object  sought  to  be  accomplished  was  to 
free  the  negotiable  instrument,  as  far  as  possible,  from  all  latent  or  local 
infirmities  that  would  otherwise  inhere  to  it,  to  the  prejudice  and  disap- 
pointment of  innocent  holders  as  against  all  of  the  parties  to  the  instrument 
professedly  bound  thereby.  This  clearly  could  not  be  effected  so  long  as 
the  instnmient  was  rendered  null  and  void  by  local  statute,  as  against 
original  maker  or  acceptor." 

The  payee  in  a  note  which  was  executed  in  blank  and  deHvered  to  a 
third  party,  who  filled  it  out  payable  to  payee  and  delivered  it  to  him,  is 
not  a  holder  in  due  cotirse,  and  takes  the  instrument  subject  to  a  defense 
that  it  was  not  completed  in  accordance  with  the  imderstanding  of  the 
maker  and  such  third  party. 

Vander  Ploeg  v.  Van  Suuk,  135  la.  351. 

A  holder  in  due  course  \mder  this  section  has  the  right  to  enforce 
payment  for  the  full  amount  against  all  parties  liable  thereon,  and  a  party 
who  is  sued  cannot  complain  that  others  equally  liable  are  not  sued, 

Choteau  Trust  Co.  v.  Smith,  153  Ky.  422. 

When  a  note  payable  to  bearer,  which  has  become  operative  by 
delivery,  has  been  lost  or  stolen  from  the  owner,  and  has  subsequently 
come  to  the  hands  of  a  bona  fide  holder  for  value,  the  latter  may  recover 
against  the  maker,  and  all  indorsers  on  the  paper  when  in  the  hands  of 
the  loser  and  the  loser  must  stand  the  loss. 

Welch  V.  Sage,  47  N.  Y.  143;  Linick  v.  Nutting,  140  App.  Div.  (N.  Y.) 
268;  Mass.  National  Bank  v.  Snow,  187  Mass.  160;  Jefferson  Bank  v. 


EIGHTS   OF   HOLDER  169 

Chapman,  122  Tenn.  416;  Adrian  v.  National  Bank,  180  Mich.  180; 
Unaka  Bank  v.  Butler,  113  Tenn.  574;  Dan.  Neg.  Int.  Sec.  393;  Schaeffer  v. 
Marsh.  90  Misc.  307;  Moskowitz  v.  Deutsch,  46  Misc.  1603. 

The  indorsee  of  a  negotiable  accommodation  note,  who  receives  the 
same  in  good  faith  before  maturity  for  value  and  without  notice  of  any 
infirmity,  is  entitled  in  an  action  thereon  against  the  maker  to  recover 
the  face  of  the  note  with  interest,  notwithstanding  such  note  was  obtained 
from  the  maker  by  the  fraud  of  the  payee  and  indorser,  and  the  plaintiff 
paid  less  than  its  face  value. 

Bissell  V.  Dickerson,  64  Conn.  61;  Lassas  v.  McCarty,  47  Or.  475. 

Usury  is  not  a  good  defense  against  the  holder  in  due  course  of  a  note. 

Emanuel  v.  Misicki,  149  N.  Y.  Supp.  905;  Oesler  v.  Behrend,  151 
N.  Y.  Supp.  853;  89  Misc.  392;  Crusins  v.  Seigman,  81  Misc.  367. 

Stolen  paper. — It  is  familiar  law  that  one  in  possession  of  chattels 
by  theft  can  convey  no  title  to  an  innocent  purchaser,  but  coin  and  bank 
bills  are  excepted  from  the  rule.  As  to  those,  even  if  feloniously  obtained, 
the  holder  can  convey  a  good  title  to  an  innocent  purchaser.  To  favor 
commerce,  the  law  makes  an  exception  also  as  to  negotiable  paper,  and 
permits  the  bona  fide  indorser  without  notice  to  acquire  title  from  a 
person  who  had  none  in  himself.  Where  by  fraud  and  without  negHgence 
one  is  induced  to  sign  a  promissory  note  imder  the  representation  and 
belief  that  it  is  a  paper  of  another  character,  and  delivers  it  to  the  payee, 
the  innocent  indorsee  before  maturity  may  recover  of  the  maker. 

Where  the  order  had  never  been  delivered,  and  therefore  had  no 
legal  inception  or  existence  as  an  order,  the  question  is  whether  there  is 
any  liability  upon  it  to  an  innocent  indorsee  for  value.  As  is  said  in 
Burson  v.  Huntington,  21  Mich.  415,  4  Am.  Rep.  497:  "The  wrongful 
act  of  a  thief  or  a  trespasser  may  deprive  the  holder  of  his  property  in  a 
note  which  has  once  become  a  note  or  property  by  delivery,  and  may 
transfer  the  title  to  an  innocent  purchaser  for  value.  But  a  note  in  the 
hands  of  a  maker  before  delivery  is  not  property,  nor  the  subject  of  owner- 
ship, as  such.  It  is  in  law  but  a  blank  piece  of  paper."  That  there  must 
be  deUvery  of  the  paper,  either  actually  or  constructively,  is  clear.  Until 
then  it  has  no  existence  as  a  contract. 

Bank  v.  Strank,  72  111.  559;  see  Section  ZS,  Schaeffer  v.  Marsh,  90 
Misc.  307;  National  Bank  v.  Snow,  187  Mass.  160;  Jefferson  Bank  v. 
Chapman,  122  Tenn.  415;  Linick  v.  Nutting,  140  App.  Div.  (N.  Y.)  265; 
Adrian  v.  Central  Bank,  180  Mich.  171;  Salley  v.  Ferrill,  95  Me.  553; 
55  L.  R.  A.  730;  Branch  v.  Commissioners,  56  Am.  Rep.  (Va.)  596;  Coch- 
ran V.  Fox,  103  Am.  Rep.  (Penn.)  982;  Biddeford  Bank  v.  Hill,  102  Me. 
346;  Cochran  v.  Fox  Bank,  209  Pa.  34;  McNight  v.  Parsons,  136  la.  390. 


170  NEGOTIABLE   INSTRUMENTS    LAW 

It  is  not  sufficient  to  show  that  a  prudent  man  would  have  been  put 
on  inquiry. 

Butchers  Ins.  Co.  v.  Hatchfield,  73  N.  Y.  226,  nor  will  evidence  of 
gross  negligence;  Seybel  v.  National  Currency  Bank,  54  N.  Y.  288. 

For  cases  under  the  section  generally,  see,  Williams  v.  Huntington, 
68  Md.  591;  Broadway  Trust  Co.  v.  Manheim,  47  Misc.  416;  Welton  v. 
Littlejohn,  163  Pa.  205;  Kuhns  v.  Gettysbiu-g  National  Bank,  68  Pa.  445; 
Real  Estate  Investment  Co.  v.  Smith,  162  Pa.  441;  Quiggle  v.  Herman, 
131  Wis.  379;  Amdt  v.  Sjoblom,  131  Wis.  642. 

§  97.  When  subject  to  original  defenses.  In  the  hands 
of  any  holder  other  than  a  holder  in  due  course,  a  negotiable 
instrument  is  subject  to  the  same  defenses  as  if  it  were  non- 
negotiable.  But  a  holder  who  derives  his  title  through  a 
holder  in  due  course,  and  who  is  not  himself  a  party  to  any 
fraud  or  illegality  affecting  the  instnunent,  has  all  the  rights 
of  such  former  holder  in  respect  of  all  parties  prior  to  the  latter. 

Variant. — The  Illinois  and  Wisconsin  statutes  insert  "duress"  after 
"fraud"  and  substitute  "such  holder"  for  "the  latter." 


The  first  sentence  of  this  section  must  be  construed  in  connection 
with  other  sections  of  the  act  restricting  the  defenses,  and  refers  only  to 
such  defenses  as  are  permitted  by  the  act  itself,  or  such  as  do  not  deny 
the  tenor  of  the  bill. 

Bradley  v.  Heybum,  56  Wash.  628. 

The  existence  of  usiu-y  in  the  contract  between  the  fraudulent  pur- 
chaser and  his  vendor,  who  without  notice  of  fraud,  makes  advances  on 
the  property,  does  not  affect  the  relative  rights  existing  between  him  and 
the  original  parties. 

Williams  v.  Tilt,  36  N.  Y.  319. 

The  purchaser  of  a  certified  check  payable  to  order,  who  obtains 
title  without  indorsement  by  the  payee,  holds  it  subject  to  all  the  equities 
and  defenses  existing  between  the  original  parties,  although  he  paid  full 
consideration  without  notice. 

Goshen  National  Bank  v.  Bingham,  118  N.  Y.  349. 

While  individuals  who  receive  gifts  of  negotiable  securities,  take  them 
subject  to  all  equities  existing  at  the  time,  they  are  not  subject  to  such  as 
may  arise  thereafter. 

First  National  Bank  of  Champlain  v.  Wood,  128  N.  Y.  35. 

An  assignee  of  a  note  secured  by  a  mortgage,  both  past  due  at  the  time 
of  the  assignment,  takes  them  subject  to  all  the  equities  which  any  per- 


RIGHTS    OF   HOLDER  171 

son  could  enforce  against  the  assignors.  There  is  no  distinction  in  this 
regard  between  eqmties  existing  in  favor  of  the  debtor  and  those  in  favor 
of  a  third  person. 

Owen  V.  Evans,  134  N.  Y.  514;  Cole  v.  Steams,  20  Misc.  502. 

When  a  maker  of  negotiable  paper  shows  that  it  was  obtained  from  him 
wrongfully,  as  by  fraud  or  duress,  a  subsequent  transferee  must  show  that 
he  is  a  bona  fide  purchaser  before  becoming  entitled  to  recover  upon  it. 

Grant  v.  Walsh,  145  N.  Y.  502. 

Where  a  corporation,  payee  of  a  promissory  note,  transferred  it  for 

full  value  to  its  president,  who  after  having  discounted  it  at  a  bank  which 

H)ecame  a  holder  in  due  course,  took  up  the  note  after  the  failure  of  the 

maker  to  pay,  he  acquired  all  the  rights  of  the  bank  in  respect  to  all 

parties  prior  to  the  latter  by  virtue  of  this  section. 

Horan  v.  Mason,  141  App.  Div.  (N.  Y.)  89. 

Where  an  officer  of  a  corporation  makes  a  corporation  obligation 
payable  to  himself,  it  bears  upon  its  face  sufficient  notice  of  his  incapacity 
to  issue  it,  when  he  attempts  to  deal  with  it  for  his  own  benefit,  does  not 
apply  where  an  officer  or  agent  deals  with  a  corporate  note,  executed  by 
himself  as  such  officer  or  agent,  but  originally  payable  to  a  third  party, 
and  which,  so  far  as  appears  upon  its  face,  had  been  regularly  issued  to  the 
original  payee,  and  by  him  transferred  to  a  firm  of  which  the  officer  is  a 
member  and  for  which  he  acted  in  dealing  with  the  note. 

Cheever  v.  P.  S.  &  L.  E.  R.  R.  Co.,  150  N.  Y.  59;  Am.  Ex.  National 
Bank  v.  N.  Y.  B.&  P.  Co.,  148  N.  Y.  698;  Miller  v.  ConsoHdation  Bank, 
48  Pa.  St.  514. 

The  general  rule  is  that  a  person,  with  knowledge  of  facts  which  will 
defeat  a  promissory  note  in  the  hands  of  the  payee,  purchases  it  from  a 
bona  fide  holder  thereof,  he  may  recover  thereon  upon  the  strength  of  such 
bona  fides ;  but  that  rule  does  not  apply  to  a  purchaser  who  is  payee  of  the 
note.  If  he  sell  such  paper  to  an  innocent  third  person  and  repurchase 
it  for  value,  he  does  not  thereby  become  possessed  of  any  better  rights  as 
against  the  maker  than  he  possessed  in  the  first  instance. 

Andrews  v.  Robertson,  111  Wis.  334. 

The  general  rule  may  be  stated  to  be  that,  when  a  person  executes  a 
negotiable  instrument  fair  on  its  face  with  nothing  to  indicate  defects, 
possible  defenses,  or  equities  in  his  favor,  he  does  so  with  the  knowledge 
that  it  will  pass  current  in  the  market,  and  may  fall  into  the  hands  of  an 
innocent  purchaser.  The  maker  takes  the  risk,  and  if  it  does  so  pass  in 
the  regular  course  of  business,  before  maturity  for  value,  into  the  hands  of  a 
person  who  takes  it  in  good  faith  without  knowledge  of  defects,  imperfec- 
tions, or  defenses  that  may  be  urged  against  its  payment,  the  maker  is 


172  NEGOTIABLE   INSTEUMENTS   LAW 

liable  to  such  innocent  holder,  no  matter  what  defenses  he  might  have  as 
between  himself  and  the  original  payee. 

Cedar  Rapids  Bank  v.  Bashara,  39  Olka.  484;  1  Dan'l  Neg.  Inst.  775. 

A  check  indorsed  in  blank  by  the  payee  and  delivered  in  exchange 
for  the  note  of  another  person  in  pursuance  of  an  arrangement  for  the 
accommodation  of  the  drawer  of  the  check,  deposited  by  the  person  who 
receives  it  in  a  bank  to  his  credit  in  the  ordinary  course  of  business  and 
immediately  drawn  against  by  him,  is  a  negotiable  instrument  and  sub- 
ject to  the  law  relating  to  such  instruments,  and  the  bank  taking  the 
check  in  good  faith  and  paying  full  value  for  it  is  not  affected  by  equities 
between  the  drawer  of  the  check  and  the  person  depositing  it.  In  such  a 
case  a  stranger  to  the  original  transaction  taking  up  the  check  by  paying 
its  full  amount  to  the  bank  after  it  had  been  dishonored,  is  entitled  to  all 
the  rights  of  the  bank  against  the  drawer. 

Symonds  v.  Riley,  188  Mass.  470. 

In  the  case  of  Montclair  v.  Romsdel,  107  U.  S.  147,  it  was  held  that  a 
holder  of  a  negotiable  instrument  is  presimied  to  have  acquired  it  in  good 
faith  and  for  value.  But  if,  in  a  suit  upon  it,  the  defense  be  such  as  to 
require  him  to  show  that  value  was  paid,  it  is  not  in  every  case  essential  to 
prove  that  he  paid  it;  for  his  title  will  be  sustained  if  any  previous  holder 
gave  value.  It  was'  there  contended  by  the  defendant  that  if  it  should 
be  found  that  either  fraud  or  illegality  in  the  inception  of  the  instrument 
was  established,  the  verdict  should  be  for  the  defendant,  unless  the  plain- 
tiff proved  that  he  purchased  for  value  or  gave  some  consideration.  But 
the  court  said:  "Such  was  not  the  law;  for  if  any  previous  holder  was  a 
bona  fide  holder  for  value,  the  plaintiff  without  showing  that  he  had  him- 
self paid  value, could  avail  himself  of  the  position  of  such  previous  holder." 

Subject  generally  see,  Merrick  v.  Alderman,  77  Conn.  634;  Craig  v. 
Palo  Alto  Farm,  16  Idaho,  706;  Lumber  Co.  v.  Snouffer,  139  Iowa  178; 
Bryan  v.  Harr,  21  App.  D.  C.  190;  Cover  v.  Myers,  75  Md.406;  McMurray 
V.  McMurray,  258  Mo.  405;  American  Seeding  Mch.  Co.  v.  Slocimi,  58 
Misc.  (N.  Y.)  458;  Comstock  v.  Buckley,  124  N.  W.  414;  Kost  v.  Bender, 
25  Mich.  515;  Young  v.  Shriner,  80  Pa.  St.  463;  Marling  v.  FitzGerald, 
138  Wis.  101;  Bush  v.  Cushman,  27  N.  J.  Eq.  131;  Rapp.  v.  Gottlieb,  142 
N.  Y.  164. 

§  98.  Who  deemed  holder  in  due  course.  Every  holder 
is  deemed  prima  facie  to  be  a  holder  in  due  course;  but  when 
it  is  shown  that  the  title  of  any  person  who  has  negotiated  the 
instrument  was  defective,  the  burden  is  on  the  holder  to  prove 
that  he  or  some  person  under  whom  he  claims  acquired  the 


BIGHTS    OF   HOLDEB  173 

title  as  a  holder  in  due  course.  But  the  last  mentioned  rule 
does  not  apply  in  favor  of  a  party  who  became  bound  on  the 
instrument  prior  to  the  acquisition  of  such  defective  title. 

It  is  a  well  settled  nile  that  when  the  maker  of  negotiable  paper  shows 
that  it  has  been  obtained  from  him  by  fraud  or  duress  a  subsequent  trans- 
feree must,  before  entitled  to  recover  on  it,  show  that  he  is  a  bona  fide 
purchaser. 

Vosburgh  V.  Diefendorf,  119  N.  Y.  357;  Hartford  National  Bank  v. 
Gardner,  157  N.  Y.  Supp.  849;  Kinney  v.  Kruse,  28  Wis.  183;  Sullivan 
V.  Langley,  120  Mass.  437;  Phillips  v.  Eldridge,  221  Mass.  103;  Muir  v. 
Edelen,  156  Ky.  212;  Ireland  v.  Scharpenberg  (Wash.)  103  Pac.  801; 
Bank  of  Polk  v.  Wood,  189  Mo.  App.  62;  Schultheis  v.  Sellers,  223  Pa. 
St.  517;  Kost  v.  Bender,  25  Mich.  515;  Amdt  v.  Heckert,  108  Md.  300; 
Schaeffer  v.  Marsh,  90  Misc.  307;  Smith  v.  Weston,  159  N.  Y.  194;  Citizens 
National  Bank  v.  Weston,  162  N.  Y.  113;  Johnson  Co.  Bank  v.  Kom- 
hauser,  160  N.  Y.  Supp.  915. 

The  holder  in  due  course  of  a  note  given  for  a  gambling  debt  must 
affirmatively  prove  that  he  holds  in  due  course  as  soon  as  it  has  been 
shown  that  the  title  of  any  person  who  negotiated  the  instrument  was 
defective. 

In  re  Hill,  187  Fed.  214. 

A  piu-chaser  for  value  of  negotiable  paper  after  matiirity  is  not  a  bona 
fide  purchaser  to  the  extent  of  being  protected  in  his  purchase  against 
the  rightful  owner,  from  whom  it  had  been  stolen,  unless  he  has  succeeded 
to  the  rights  of  a  bona  fide  purchaser  before  maturity.  The  burden  is 
upon  the  purchaser  in  such  a  case  to  show  that  he  is,  or  has  succeeded  to 
the  rights  of,  a  bona  fide  purchaser  before  maturity;  there  is  no  presimiption 
that  the  thief  negotiated  the  paper  before  it  became  overdue. 

Northampton  National  Bank  v.  Kidder,  .106  N.  Y.  221;  Hinkley  v. 
Merchants  Bank,  133  Mass.  147. 

A  purchaser  in  good  faith  acquires  valid  title  to  negotiate  bonds 
payable  to  bearer,  although  they  may  have  been  stolen  by  the  prior  holder. 
Welch  V.  Sage,  47  N.  Y.  143;  Seybel  v.  National  Bank,  54  N.  Y.  288; 
Everton  v.  National  Bank,  66  N.  Y.  14;  Wylie  v.  Railway  Co.,  41  Fed. 
623;  ConsoHdated  Planters  v.  Numa,  28  La.  Ann.  552;  City  of  Adrian 
V.  National  Bank,  180  Mich.  179. 

It  is  apparent  when  this  section  is  read  in  connection  with  all  other 
sections  in  this  article,  that  it  means  to  place  the  burden  upon  the  holder 
to  prove  that  he,  or  some  person  imder  whom  he  claims,  comes  within 
the  provision  of  the  fourth  clause  of  the  statutory  definition  of  a  holder 
in  due  course — that  is,  that  the  biirden  is  then  upon  him  to  show  that  at 


174  NEGOTIABLE   INSTRUMENTS   LAW 

the  time  the  instrument  was  negotiated  to  him  he  had  no  notice  of  any 
infirmity  in  the  instrument  or  defect  in  the  title  of  the  person  negotiating 
it. 

Justice  V.  Stonecipher,  267  111.  454. 

The  maker  of  a  note,  sued  thereon  by  its  indorsee,  proving  that, 
when  it  was  made,  it  was  agreed  between  maker  and  payee  that  it  should 
not  be  negotiated,  but  should  be  paid  solely  from  money  to  become  due 
for  work  to  be  performed,  right  to  recover  is  defeated  in  the  absence  of 
further  evidence  by  plaintiff. 

Garone  v.  Russo-Iodice  Realty  Co.,  164  N.  Y.  Supp.  135. 

Declarations  of  a  former  owner  of  negotiable  instnmient  or  chose  in 
action  are  not  admissible  against  the  holder  or  assignee  to  affect  his  title 
or  rights. 

Mukle  v.  Beidleman,  165  N.  Y.  21;  Doge  v.  Freedman's  Saving  Co., 
93  U.  S.  379;  German- American  Bank  v.  Stade,  15  Misc.  287. 

The  payment  of  value  for  negotiable  paper  is  circumstances  to  be 
taken  into  accoimt  with  other  facts  in  determining  the  question  of  bona 
fides  of  the  transaction,  and  when  fvill  value  is  paid,  is  entitled  to  great 
weight;  but  that  fact  is  not  conclusive  where  it  appears  that  the  paper 
was  obtained  from  the  maker  fraudulently,  or  under  such  circimistances 
that  the  original  holder  could  not  have  maintained  an  action  thereon, 
except  in  the  absence  of  all  evidence  tending  to  show  notice  to,  or  bad 
faith  on  the  part  of  the  purchaser. 

Canajoharie  National  Bank  v.  Diefendorf,  123  N.  Y.  191;  King  v. 
Doane,  139  U.  S.  166;  Bailey  v.  Smith,  14  Oh.  St.  396,  402. 

Burden  of  Proof. — ^When  the  maker  has  shown  that  the  note  was 
obtained  from  him  under  duress,  or  that  he  was  defrauded  of  it,  or  that  it 
was  without  consideration  and  fraudulently  put  in  circulation,  the  holder 
^\'ill  then  be  required  to  show  under  what  circumstances  he  acquired  the 
instrument. 

First  National  Bank  v.  Green,  43  N.  Y.  298;  Olean  National  Bank  v. 
Carll,  55  N.  Y.  441;  Vosburgh  v.  Diefendorf,  119  N.  Y.  357,  366;  Cana- 
joharie National  Bank  v.  Diefendorf,  123  N.  Y.  191 ;  McCannon  v.  Shantz, 
49  App.  Div.  (N.  Y.)  460;  German-American  Bank  v.  Cunningham,  97 
App.  Div.  246;  Am.  Exchange  National  Bank  v.  N.  Y.  Belting  Co.,  148 
N.  Y.  698;  Peterson  v.  Fowler,  162  App.  Div.  (N.  Y.)  23;  Interboro  Brew. 
Co.  V.  Doyle,  165  App.  Div.  (N.  Y.)  646;  Engle  v.  Hyman,  54  Misc.  253; 
Lucker  v.  Ira,  54  App.  Div.  (N.  Y.)  566;  Mitchell  v.  Baldwin,  88  App. 
Div.  (N.  Y.)  266;  Consolidated  National  Bank  v.  Kirkland,  99  App.  Div. 
122;  International  Brew.  Co.  v.  Doyle,  165  App.  Div.  646;  Joy  v.  Diefen- 
dorf, 130  N.  Y.  6;  National  Bank  of  Pittsburgh  v.  Hoffman,  229  Pa.  St. 


BIGHTS   OF   HOLDEB  175 

429;  Bank  of  Morehead  v.  Hemig,  220  Pa.  St.  224;  National  Bank  of 
Barre  v.  Foley,  54  Misc.  126;  Steinberger  v.  Hittleman,  93  Misc.  105. 

For  cases  on  subject  generally  see,  Strickland  v.  N.  Y.  C.  &  H.  R.  R. 
R.  Co.,  88  App.  Div.  (N.  Y.)  366;  Mills  v.  Sparrow,  131  App.  Div.  (N.  Y.) 
242;  Wamock  Unifonn  Co.  v.  Garifalos,  170  App.  Div.  674;  Joveshof  v. 
Rockey,  58  Misc.  559;  Mitchell  v.  Baldwin,  88  App.  Div.  (N.  Y.)  266; 
Beck  V.  Mailer,  131  App.  Div.  (N.  Y.)  243;  First  National  Bank  v.  Moore, 
148  Fed.  954;  Fuller  v.  Percival,  126  Mass.  381;  Fiegenspan  v.  McDonnell, 
201  Mass.  342;  Mayers  v.  McRimmon,  140  N.  C.  642. 


176  NEGOTIABLE    INSTRUMENTS   LAW 

ARTICLE  7 
Liabilities  of  Parties 

Section  no.  Liability  of  maker. 

111.  Liability  of  drawer. 

112.  Liability  of  acceptor. 

113.  When  person  deemed  indorser. 

114.  Liability  of  irregular  indorser. 

115.  Warranty;  where  negotiation  by  delivery  or  by 

a  qualified  indorsement. 

116.  Liability  of  general  indorser. 

117.  Liability  of  indorser  where  paper  negotiable  by 

delivery. 

118.  Order  in  which  indorsers  are  liable. 

119.  Liability  of  agent  or  broker. 

§  no.  Liability  of  maker.  The  maker  of  a  negotiable 
instrument  by  making  it  engages  that  he  will  pay  it  according 
to  its  tenor;  and  admits  the  existence  of  the  payee  and  his 
then  capacity  to  indorse. 

The  obligations  of  a  maker  and  of  a  mere  indorser  of  a  negotiable 
instrument  are  essentially  different,  that  of  the  maker  being  absolute  while 
that  of  an  indorser  is  contingent. 

Hough  V.  State  Bank,  61  Fla.  292. 

The  maker  is  estopped  from  setting  up  that  the  instrument  is  payable 
to  a  fictitious  payee,  if  by  such  averment  the  instrument  would  be  defeated. 

Jones  V.  Home  Furnishing  Co.,  9  App.  Div.  (N.  Y.)  103;  Irving 
National  Bank  v.  Allen,  79  N.  Y.  336. 


LIABILITIES    OF    PAETIES  177 

The  fact  that  the  instnmient  is  made  payable  to  the  maker  and  he  is 
the  first  indorser  does  not  change  or  affect  the  nature  and  character  of  the 
maker's  liability.  He  remaining  the  ultimate  debtor,  the  person  who 
ought  to  pay  the  debt  in  preference  to  all  other  parties  to  the  paper. 

Delaware  Co.  Trust  Co.  v.  Haser,  199  Pa.  St.  17;  Madison  Square 
Bank  v.  Pierce,  137  N.  Y.  44;  Ewan  v.  Brooks,  55  Ohio  St.  596;  Hillegas 
V.  Stevenson,  75  Mo.  118. 

The  general  rule  may  be  said  to  be,  when  a  person  executes  a  negotiable 
instrument  fair  on  its  face  with  nothing  to  indicate  defects,  possible 
defenses  or  equities  in  his  favor,  he  does  so  with  the  knowledge  that  it  will 
pass  current  in  the  market,  and  may  fall  into  the  hands  of  an  innocent 
purchaser.  The  maker  takes  this  risk;  and  if  it  does  so  pass  in  the  regular 
cotirse  of  business,  before  maturity  for  value,  into  the  hands  of  a  person 
who  takes  it  in  good  faith,  without  knowledge  of  defects,  imperfections, 
or  defenses  that  may  be  urged  against  its  payment,  the  maker  is  liable 
to  such  innocent  holder,  no  matter  what  defenses  he  might  have  as  between 
himself  and  the  original  payee. 

Cedar  Rapids  Bank  v.  Boshara,  39  Okla.484;  Dan.  Neg.Int.,Sec.  775; 
Levy  V.  Arons,  81  Misc.  165. 

In  an  action  against  the  maker  of  a  note  where  it  appears  that  the 
note  was  obtained  by  duress,  the  plaintiff  must  show,  in  order  to  recover, 
that  he  is  a  holder  in  due  course. 

Phillips  V.  Eldridge  (Mass.),  108  N.  E.  Rep.  909. 

The  fact  that  a  note  was  procured  by  fraud  is  not  a  defense  against 
a  holder  in  due  course. 

Conqueror  Trust  Co.  v.  Reves  Drug  Co.  (Ark.),  176  S.  W.  Rep.  119; 
Swanke  v.  Herdeman,  138  Wis.  654. 

Want  of  consideration  is  no  defense  to  negotiable  paper  in  the  hands 
of  a  holder  in  due  course  or  in  the  hands  of  his  transferee. 

Douglass  V.  Burton  (Neb.),  154  N.  W.  Rep.  718. 

Negligence  in  signing  the  instrument,  or  in  failing  to  ascertain  the 
contents  thereof  will  render  the  signer  liable  to  a  bona  fide  holder  upon 
the  principle  of  estoppel,  although  he  may  have  been  induced  to  sign  it 
by  fraud  or  imposition  practised  upon  him. 

4  Am.  and  Eng.  Ency.  of  Law,  201;  Chapman  v.  Rose,  56  N.  Y.  137; 
but  see  Johnson  Co.  Bank  v.  Komhauser,  174  App.  Div.  136,  note  Sub- 
division 4,  Section  91.     See  notes,  Section  94  fraud. 


178  NEGOTIABLE   INSTRUMENTS    LAW 

New  Orj.el\ns  National  Bank  3 

Of  new  0RIC*NS 

PAY  TO  NEW  ORLEANS  NATIONAL  BANK 
CHARLES   A.  BRADLEY 

The  above  check  was  made  payable  to  the  order  of  William  A.  Dake. 
Charles  A.  Bradley  being  the  maker  by  this  indorsement  cancelled  the 
order  upon  the  face  of  the  check,  and  the  New  Orleans  National  Bank  in 
the  absence  of  certification  is  not  liable  to  the  payee.  The  check  evidently 
never  having  been  delivered  to  the  payee  and  the  bank  may  without  risk 
act  on  the  maker's  indorsement. 

The  holder  of  a  note  with  whom  the  indorsee  had  deposited  the  full 
amoimt  thereof  as  security  for  its  collection  may  maintain  an  action  in 
his  own  name  against  the  maker,  and  a  judgment  in  favor  of  the  holder 
would  be  a  bar  to  any  other  suit  on  the  same  note,  as  payment  to  the  holder 
would  discharge  the  note. 

People's  National  Bank  v.  Rice,  149  App.  Div.  (N.  Y.)  19;  Madison 
Square  Bank  v.  Pierce,  137  N.  Y.  414;  Twelfth  Ward  Bank  v.  Brooks, 
63  App.  Div.  (N.  Y.)  220. 

Where  a  notary  procured  the  maker  of  a  mortgage  note  to  sign  a  new 
note,  upon  the  false  representation  that  the  original  note  had  been  de- 
stroyed, the  maker  was  liable  on  both  notes  to  those  who  purchased  them 
in  due  course  from  the  notary. 

McCowen  v.  Bamett  (La.),  68  So.  Rep.  102. 

Liability  on  lost  notes. — As  to  the  liability  of  the  maker  on  supposed 
lost  note  for  which  duplicates  had  been  issued  see, 

Farmers'  Bank  v.  Crawford  (S.  C),  88  S.  E.  13;  Edens  v.  Gibson, 
100  S.  C.  353;  84  S.  E.  1005. 


LIABILITIES    OF    PAETIES  179 

Liability  of  surety  signing  as  maker. — Surety  who  signs  as  maker  is 
primarily  liable  and  is  not  discharged  by  the  granting  of  any  extension  to 
the  principal  maker. 

Cowan  V.  Ramsey,  15  Ariz.  533;  Union  Trust  Co.  v.  McGinty,  212 
Mass.  205;  Vanderford  v.  Farmers,  etc.,  National  Bank,  105  Md.  164; 
First  State  Bank  v.  Williams,  164  Ky.  143;  Cellars  v.  Meachem,  49  Oreg. 
186;  Hardy  v.  Carter  (Tex.  Civ.  App.  1914),  163  S.  W.  1003;  Wolsten- 
holme  V.  Smith,  34  Utah  300;  Bradley,  etc.,  Co.,  v.  Heyburn,  56  Wash. 
628;  Richards  v.  Market  Exch.  Bank  Co.,  81  Ohio  St.  348. 

An  accommodation  maker  or  surety  is  primarily  liable  and  is  therefore 
not  entitled  to  notice  of  dishonor. 

State  Bank  of  Nortonville  v.  WilUams,  164  Ky.  143. 

Liability  of  joint  makers. — When  a  promissory  note  is  executed  by 
two  persons  jointly  and  severally,  the  presumption  is  that  the  debt  was 
created  for  their  equal  benefit,  and  the  burden  of  proving  that  one  of  the 
makers  signed  as  surety  for  the  other  is  upon  the  party  alleging  it. 

Brady  v.  Brady,  110  Md.  656;  2  Ency.  of  Evidence,  462;  27  Am. 
&  Eng.  Ency.  of  Law,  438;  Richards  v.  Market  Exch.  Bank,  81  Ohio  St. 
348,  354;  26  L.  R.  A.  (N.  S.)  99;  Hunter  v.  Harris,  63  Or.  505;  127  Oac.  786. 

One  who  signs  a  promissory  note  as  joint  maker,  although  in  fact 
signing  as  surety  for  his  co-maker,  is  liable  as  a  maker,  although  the 
capacity  in  which  he  signed  was  known  to  the  payee.  He  is  not  discharged 
by  extension  of  time  granted  without  his  consent  to  this  co-maker. 

Cleveland  National  Bank  v.  Bickel,  159  Pac.  302;  United  States  v. 
Hogge,  6  How.  279;  Watuga  Bank  v.  Matson,  99  Tenn.  390. 

One  of  two  or  more  joint  makers  of  a  promissory  note  may  show  as 
against  the  payee  what  the  agreement  was  at  the  time  of  signing  it,  and  if 
any  valid  condition  was  stipulated  to  relieve  such  maker  from  liability. 

Hover  v.  Magley,  116  App.  Div.  N.  Y.  84. 


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180  NEGOTIABLE   INSTRUMENTS    LAW 

The  foregoing  note  was  signed  by  three  makers  and  was  a  security  for 
the  purchase  price  of  a  road  roller.  The  sole  question  arising  at  the  trial 
of  an  action  thereon  was  as  to  whether  the  note  constituted  a  joint  or 
several  liability.  Each  of  the  makers  thereby  agreed  to  pay  the  amount 
due  in  proportion  to  his  road  tax.  The  plaintiff  held  that  it  is  unreason- 
able that  a  business  corporation  should  assume  the  determination  of  the 
amount  due  from  each  maker.  The  court  held  that  there  was  no  ambiguity 
on  the  face  of  the  instrument  and  that  it  created  a  separate  and  not  joint 
liability. 

Western  Wheel  Co.  v.  Locklin,  100  Mich.  339. 

Where  a  promissory  note  is  made  by  several  and  states  that  "we 
promise  to  pay"  it  is  a  joint  note,  but  where  it  states  "I  promise  to  pay" 
and  is  signed  by  two  or  more  it  is  their  joint  and  several  note.  Although 
the  promise  is  expressed  by  the  use  of  the  singular  pronoun  "I,"  if  the  inten- 
tion of  all  the  signers  to  become  joint  and  several  original  makers  is  uncon- 
tradicted by  anything  on  the  face  of  the  note,  such  is  the  legal  interpreta- 
tion of  such  a  promise  signed  at  the  same  time  by  several,  when  the  char- 
acter and  object  of  their  signature  is  imexplained. 

Dow  Law  Bank  v.  Godfrey,  126  Mich.  521;  Ladd  v.  Baker,  26  N.  H. 
70;  Monson  v.  Brakeley,  40  Conn.  552;  3  R.  C.  L.  355. 

The  indorsee  of  a  promissory  note  cannot  maintain  a  joint  action 
against  the  ten  makers  of  the  note,  when  the  note  on  its  face  states  that  the 
liability  of  each  of  the  makers  is  limited  to  one-tenth  of  the  amount  of  the 
note. 

Bank  of  Phoenixville  v.  Buckwalter,  214  Pa.  St.  289. 

In  Costigan  v.  Lunt,  104  Mass.  217,  the  court  said:  "His  contract 
was  to  build  a  boat  for  both  of  them,  and  when  finished  was  to  belong  to 
both  of  them  as  tenants  in  common.  But  their  promise  to  pay  for  it  is 
several  and  joint.  It  is  true  they  expressed  themselves  in  the  plural 
number  and  use  the  expression  'we  will  pay,'  but  the  terms  of  this  promise 
must  be  considered  as  qualified  by  the  stipulation  that  each  of  the  defend- 
ants is  to  pay  one-half.  Taking  the  whole  instrument  together,  it  must 
be  interpreted  as  providing  that  each  defendant  shall  pay  one-half  and  no 
more." 

Liability  of  Corporations. — Parties  dealing  with  a  corporation  are,  of 
course  required  to  take  notice  of  the  authority  of  the  corporation,  but  the 
same  strictness  is  not  required  as  to  the  manner  in  which  the  authority  is 
exercised. 

In  Merchants'  National  Bank  of  Gardiner  v.  Citizens'  Gas  Light  Co., 
159  Mass.  505,  34  N.  E.  1083,  38  Am.  St.  Rep.  453,  it  is  held: 


LIABILITIES    OF    PAKTIES  181 

"If  a  corporation  permits  its  treasurer  to  act  as  its  fiscal  agent,  and 
holds  him  out  to  the  public  as  having  the  general  authority  implied  from 
his  official  name  and  character,  and  by  its  silence  and  acquiescence  suffers 
him  to  draw  drafts,  and  to  indorse  notes  payable  to  the  corporation,  it  is 
bound  by  his  acts  within  the  scope  of  such  implied  authority." 


In  National  Spraker  Bank  v.  Geo.  C.  Treadwell  Co.,  80  Hun.  363,  30 
N.  Y.  Supp.  77,  the  syllabus  reads: 

"The  fact  that  a  promissory  note  was  made  by  the  president  of  a 
corporation,  and  was  not  signed  by  its  treasurer  in  accordance  with  the 
by-laws  of  the  company,  constitutes  no  defense  to  an  action  thereon  if  the 
paper  was  not  diverted  from  its  original  purpose,  went  into  the  hands  of 
a  bona  fide  holder  and  the  company  received  the  benefit  of  the  proceeds." 

In  Allegheny  City  v.  McClurkan  &  Co.,  14  Pa.  81,  the  court  says: 

"The  object  of  all  law  is  to  promote  justice  and  honest  dealing,  when 
that  can  be  done  without  violating  principle.  I  cannot  perceive  that  any 
principle  is  violated  by  holding  a  corporation  liable  for  the  contracts  of 
its  accredited  agents,  even  not  expressly  authorized,  when  these  contracts, 
for  a  series  of  times,  were  entered  into  publicly,  and  in  such  a  manner,  as 
by  necessary  and  irresistible  implication  to  be  within  the  knowledge  of 
the  corporators.  It  was  the  acquiescence  of  the  corporators,  and  the  habit 
and  custom  of  business  of  the  corporation,  which  induced  the  public  to 
give  credit  to  the  scrip  or  notes,  which  was  evidence  of  contract.  But 
when  to  this  circimistance  we  add  that  the  corporators  themselves  received 
the  value  of  these  notes  or  contracts  in  the  erection  of  improvements  in  the 
city,  and  enjoyed  and  still  enjoy  the  value  of  them,  the  conclusion  is 
irresistible  that  the  corporators  ought  to  pay  them  by  the  assessment  of 
taxes  on  the  corporations,  if  it  has  no  other  available  means.  The  debt 
is  due  by  positive  engagement — it  is  due  ex  aequo  et  bono — ^in  the  forum 
of  conscience,  and  the  forum  of  law.  One  rule  of  law  is  often  met  and 
counterchecked  by  another  of  equal  force,  so  that  although  the  corporators 
are  in  general  protected  from  unauthorized  acts  of  their  agents,  yet  at  the 
same  time  a  rule  of  equal  force  requires  that  they  should  not  deceive  the 
public,  or  lead  them  to  trust  and  confide  in  unauthorized  acts  of  their 
agents.  If  they  receive  the  avails  and  value  of  those  acts,  it  is  implicit 
evidence  that  they  consented  to  and  authorized  them.  They  adopt  the 
act  and  are  responsible  to  those  who  on  the  faith  of  such  acquiescence  and 
approbation  trusted  their  agents." 


182  NEGOTIABLE   INSTRUMENTS   LAW 

Complaint  against  maker  of  note 

{TITLE  OF  CAUSE) 

The  plaintiff  in  the  above  entitled  action  complains  of  the  defendant  and 
alleges  on  information  and  belief,  that  the  defendant  herein,  on  or  about  the 

day  of in  the  year  igi....,  at ,for 

value  received,  made  his  promissory  note  in  writing,  of  which  the  following 
is  a  copy: 

(COPY  OF  THE  NOTE) 

And  then  and  there  delivered  the  same  to  the  said 

the  payee  therein  named,  and  the  said  note  was  thereafter,  before  it  became 
due,  duly  transferred  and  delivered  to  plaintiff,  for  value,  who  then  became 
and  still  is  the  holder  and  owner  thereof.  That  said  note  became  due  and 
payable  on  the  day  of igi 

That  when  the  said  note  became  due  and  payable  it  was  duly  presented 
at  the  place  therein  named  for  payment,  and  payment  thereof  duly  demanded, 
which  was  refused,  and  said  note  was  thereupon  duly  protested  for  such  non- 
payment, and  plaititiff  paid  notary^ s  fees  of  protest. 

That  before  the  commencement  of  this  action  said  note  became  wholly 
due  and  now  remains  wholly  unpaid.     That  there  is  now  due  thereon,  from 

the  said  defendant  to  the  plaintiff  the  sum  of 

dollars,  with  interest  thereon  from  the   day  of igi  ...... 

besides  said  notary's  fees  of  protest. 

That  all  the  parties  to  this  action  are  now,  at  the  time  of  the  commence- 
ment of  this  action,  residents  of  ike of 

County  of ,  in  the  State  of 

WHEREFORE,  the    plaintiff    demands    judgment    against    the    said 

defendant  for  the  sum  of   dollars 

and cents,  with  interest  thereon  from  the 

day  of igi    ,  and dollars  and 

cents,  notary's  fees  of  protest,  besides  the  costs  of  this  action. 


Plaintiff's  Attorney. 
Complaint  by  accommodation  maker 
{TITLE  OF  CAUSE) 

The  plaintiff  of  the  above  entitled  action  complains  of  the  defendant 
therein  and  alleges  upon  information  and  belief:     That    on  or  about  the 

day  of igi....,  

made  his  promissory  note  in  writing,  of  which  the  following  is  a 

copy:  {Copy  of  note).     That  the  said  note  was  made  at  the  special  instance 
and  request  and  for  the  accommodation  of  defendant  herein,  who  promised 


LIABILITIES   OF    PAETIES  183 

to  pay  the  same  at  its  maturity.  And  that  the  plaintiff  never  received  any 
consideration  therefor.  That  before  maturity  and  for  a  valuable  consideration 
defendant  indorsed  the  said  note  and  transferred  the  same  to 

That  defendant  failed  to  pay  said  note  or  any  part  thereof  when  by  its 
terms  it  became  due,  or  at  any  time  thereafter. 

That  by  reason  thereof  the  plaintiff  herein  was  compelled  to  pay  and  did 
pay  the  same  on  the  day  of  191  to 

That  demand  has  been  made  by  plaintiff  to  defendant  for  the  payment 
thereof  and  the  same  remains  wholly  unpaid. 

WHEREFORE  plaintiff  asks  judgment  against  defendant  for  the  sum 

of dollars,  with  interest  from  the  day  of 

igi....,  besides  the  costs  of  this  action. 


Plaintiff's  Attorney. 

Complaint  Against  Maker  and  Indorser. 
(TITLE  OF  CAUSE) 

The  plaintiff  in  the  above  entitled  action   complains  of  the  defendant 
therein  and  alleges  on  information  and  belief,  that  the  defendant  (name  of 

maker),  on  or  about  the  day  of  in 

the  year  191....,  at ,  for  value  received, 

made  his  promissory  note  in  writing,  of  which  the  following  is  a  copy: 

{COPY  OF  NOTE) 

And  then  and  there  delivered  the  same  to  the  said 

the  payee  therein  named,  and  the  said  defendant  afterwards  endorsed  the  said 
note;  and  before  maturity,  for  value  received,  duly  transferred  and  delivered 
the  same  to  plaintiff,  who  then  became  and  still  is  the  owner  and  holder  thereof. 

That  said  note  became  due  and  payable  on  the  day  of 

191 

That  when  said  note  became  due,  and  before  the  commencement  of  this 

action,  it  was  duly  presented   at  Bank,  the  place 

therein  named  for  payment,  and  payment  thereof  duly  demanded,  which  was 
refused,  and  said  note  was  thereupon  duly  protested  for  non-payment,  of  all 

which  the  said  defendant  had  due  notice,  and  plaintiff  paid 

notary's  fees  of  protest. 

That  the  said  defendant  has  not  paid  the  said  note  or  any  part  thereof. 

That  there  is  now  due  thereon  from  the  defendant  to  the  plaintiff  the  sum 

of   Dollars    and    Cents 

($ ),   with   interest   thereon  from   said   day   of 

iQ....,  and  said  notary's  fees  of  protest. 


184  NEGOTIABLE   INSTRUMENTS   LAW 

That  all  the  parties  of  this  action  are  now,  at  the  time  of  the  commencement 

of  this  action,  residents  of  the of , 

County  of in  the  State  of 

WHEREFORE,  the  plaintif  demands  judgment  against  the  said  defend- 
ant for  the  sum  of  Dollars  and 

Cents  {$ ),with  interest  thereon  from  the 

day  of  igi....,  besides  the  cost  of  this 

action. 


Plaintiff's  Attorney. 
(  Verification) . 

§  III.  Liability  of  drawer.  The  drawer  by  drawing  the 
instnmient  admits  the  existence  of  the  payee  and  his  then 
capacity  to  indorse ;  and  engages  that  on  due  presentment  the 
instrument  will  be  accepted  and  paid,  or  both,  according  to 
its  tenor,  and  that  if  it  be  dishonored,  and  the  necessary  pro- 
ceedings on  dishonor  be  duly  taken,  he  will  pay  the  amount 
thereof  to  the  holder,  or  to  any  subsequent  indorser  who  may 
be  compelled  to  pay  it.  But  the  drawer  may  insert  in  the 
instrument  an  express  stipulation  negativing  or  limiting  his 
own  liability  to  the  holder. 

Variant. — The  Colorado  and  Illinois  stateutes  omit  the  word  "subse- 
quent" near  the  end  of  the  first  sentence.  The  New  York,  District  of 
Columbia,  North  Dakota  and  EngHsh  Acts  read  "accepted  and  paid." 


The  drawer  of  a  bill  of  exchange  luidertakes  that  there  shall  be  paid 
to  the  holder  of  the  instrument  the  sum  of  money  therein  mentioned  at 
the  place  named. 

Hibernian  National  Bank  v.  Lacombe,  84  N.  Y.  367;  Amsick  v. 
Rogers,  189  N.  Y.  252. 

The  drawer  of  a  check  undertakes  that  the  drawee  will  be  found  at 
the  place  where  he  is  described  to  be,  and  that  the  sum  specified  will  there 
be  paid  to  the  holder  when  the  check  is  presented;  and  if  not  so  paid  and  he 
is  notified,  he  becomes  absolutely  bound  to  pay  the  amount  at  the  place 
named. 

Hibemia  National  Bank  v.  Lacombe,  84  N.  Y.  367;  Usher  v.  Tucker, 
217  Mass.  441,  105  N.  E.  360. 

A  bill  of  exchange  upon  acceptance  becomes  in  effect  a  promissory 
note,  the  acceptor  standing  in  the  place  of  the  maker  and  becoming  pri- 
marily liable,  and  the  maker  standing  in  the  place  of  the  fi.rst  indorser. 


LIABILITIES    OF    PAETIES  185 

U.  S.  Rail  Co.  V.  Wiener,  169  App.  Div.  (N.  Y.)  561. 

Drawer's  liability  as  to  stolen  checks.— Where  a  blank  check  left  by 
the  drawer  with  his  bookkeeper  is  stolen  by  an  employee,  filled  out  and 
collected,  the  payment  by  the  drawee  bank  is  valid  as  against  the  drawer. 
The  drawer  is  under  a  duty  to  see  that  his  checks  do  not  get  into  the  hands 
of  those  for  whom  they  are  not  intended. 

Trust  Company  of  America  v.  Conklin,  65  Misc.  Rep.  (N.  Y.)  1,  119 
N.  Y.  Supp.  367;  Phillips  v.  Joy,  (Me.)  96  Atl.  727. 

Where  a  check,  complete  in  every  respect,  except  as  to  deHvery,  is 
stolen  from  the  drawer  by  the  payee  and  negotiated  by  the  latter  to  a  holder 
in  due  course,  the  holder  is  entitled  to  recover  thereon. 

Schaeffer  v.  Marsh,  153  N.  Y.  Supp.  96. 

While  the  bank  upon  which  a  check  is  drawn  is  protected  in  paying  a 
check  signed  in  blank,  never  delivered  but  stolen,  the  purchaser  of  such  a  check 
is  not  protected.  Illustrating  this  is  Linick  v.  Nutting  &  Co.,  125  N.  Y. 
Supp.  93.  In  that  case  a  depositor  signed  his  name  to  a  blank  check. 
The  check  was  stolen  from  him,  the  name  of  a  payee  inserted,  certification 
procured  by  the  drawee,  and  the  check  was  then  negotiated  for  value  to 
defendant  who  collected  the  amount  from  the  drawee.  The  drawer  took 
up  the  check  from  the  drawee  and  brought  smt  against  the  defendant  as 
for  money  had  and  received  for  the  amount  of  the  check.  The  court  held 
that  the  drawer  was  entitled  to  recover  because  the  check  was  never 
delivered  and  therefore  never  had  any  valid  inception  as  a  contract.  The 
court  pointed  out  the  difference  in  the  relation  of  a  drawer,  who  signs  a 
check  in  blank  which  is  stolen,  to  the  drawee  which  pays  such  check  and 
to  the  purchaser.  It  said  that  in  view  of  the  contractual  relation  exist- 
ing between  the  bank  and  its  depositor  imder  which  the  bank  is  bound  to 
pay  his  genuine  checks,  the  depositor  owes  a  duty  of  care  to  the  bank.  But 
a  third  person  is  under  no  obligation  to  honor  his  check,  he  can  take  it  or 
not  as  he  pleases,  and  as  to  the  purchaser,  the  depositor  in  drawing  a  check 
is  not  obliged  to  guard  against  the  possibility  of  being  deprived  of  the 
possession  of  an  incomplete  negotiable  instrument  by  a  crime.  The 
defendant  in  this  case  contended  that,  as  against  the  depositor,  the  drawee 
bank  was  justified  in  paying  out  the  money  on  the  check;  therefore  the 
payment  being  good,  the  depositor  should  not  be  entitled  to  recover  it 
from  the  holder  who  received  the  money.  But  the  court  said  that  if  the 
drawee  bank  was  justified,  as  against  its  depositor  in  paying  such  a  check, 
and  could  charge  the  same  to  his  account,  this  was  not  because  the  check 
was  a  valid  check  in  the  hands  of  a  third  person,  but  because  of  the  peculiar 
contract  relation  between  the  bank  and  its  depositor.  Not  being  a  vahd 
obligation  in  the  hands  of  the  defendant,  the  action  by  the  depositor  for 
money  had  and  received  would  lie. 


186  NEGOTIABLE   INSTRUMENTS   LAW 

Liability  on  mutilated  checks. — In  paying  without  inquiry  a  check 
which  has  been  torn  in  pieces  and  pasted  together  again,  a  bank  is  guilty  of 
negligence  and  is  responsible  to  the  drawer  for  such  loss  as  he  suffers. 

Scholey  v.  Ramsbottom  2  Camp.  (Eng.)  485;  Ingham  v.  Primrose, 
7  C.  B.  N.  S.  (Eng.)  82. 

Liability  on  checks  delivered  to  an  impostor,  or  wrong  person. — Where 
the  drawer  of  a  check  delivers  it  to  an  impostor,  believing  him  to  be  the 
payee  named  in  the  check,  the  indorsement  thereof  by  the  impostor  is  not  a 
forgery,  and  the  drawer  is  liable  to  any  subsequent  bona  fide  holder. 

Burrows  v.  Western  Union  Tel.  Co.,  86  Minn.  499,  90  N.  W.  Rep. 
1111;  First  Nat.  Bank  v.  American  Exch.  Nat.  Bank,  49  N.  Y.  App.  Div. 
349,  63  N.  Y.  Supp.  58,  Afid.,  170  N.  Y.  88,  62  N.  E.  Rep.  1089;  Gallo  v. 
Brooklyn  Savings  Bank,  129  N.  Y.  App.  Div.  698,  114  N.  Y.  Supp.  78; 
Jamieson  &  McFarland  v.  Heim,  43  Wash,  153,  86  Pac.  Rep.  165.  United 
States  V.  National  Exchange  Bank,  45  Fed.  Rep.  163;  Hoge  v.  First  Nat. 
Bank,  18  111.  App.  501;  Meridian  Nat.  Bank  v.  First  National  Bank,  7 
Ind.  App.  322;  Meyer  v.  Indiana  National  Bank,  27  Ind.  App.  354,  61 
N.  E.  Rep.  596;  Emporia  National  Bank  v.  Shotwell,  35  Kan.  360;  Sherman 
V.  Com  Exch.  Bank,  91  N.  Y.  App.  Div.  84,  86  N.  Y.  Supp.  341;  McHenry 
v.  Old  Citizens'  National  Bank,  Ohio,  97  N.  E.  Rep.  395.  But  see  Tolman 
V.  American  National  Bank,  22  R.  I.  462,  48  Atl.  480. 

Where  a  check  is  enclosed  in  a  letter  which  is  misdirected  by  mistake 
of  the  drawer  of  the  check,  and  the  letter  is  delivered  to  another  person  of 
the  same  name  as  the  payee,  who  indorses  and  negotiates  the  check,  which 
is  finally  received  by  the  drawee  bank  and  paid  and  charged  to  the  drawer's 
account,  the  latter  cannot  recover  from  the  bank. 

Weisberger  v.  Bank,  84  Ohio  St.  21. 

Complaint  by  payee  against  drawer. 

{TITLE  OF  CAUSE) 

The  plaintiff  in  the  above  entitled  action  complains  of  the  defendant 
therein  and  alleges,  on  information  and  belief,  that  the  defendant  for  value 

received,  on  the  day  of igi  ,  made  and 

delivered  to  plaintiff  herein  his  check  in  writing,  dated  that  day,  directed  to 

the  Bank,  thereby  directing  said  bank  to  pay  to 

{or  bearer)  the  sum  of  dollars.     That 

thereafter  and  on  the  day  of igi....  the  said  check  was 

presented  to  the  said  Bank  and  payment   thereof  demanded, 

which  payment  was  refused,  and  the  said  check    remains   wholly  unpaid. 
That  there  is  now  due  and  owing  plaintiff  from  defendant  thereon  the  sum  of 


LIABILITIES   OF   PARTIES  187 

dollars  with  interest  from    the    day    of 

igi....,  for  which  amount  plaintif  demands  judgment, 

besides  the  costs  of  this  action. 


Plaintiff's  Attorney. 

Complaint  by  holder  against  drawer  and  indorser 

{TITLE  OF  CAUSE) 

The  plaintiff  in  the  above  entitled  action  complains  of  defendants  herein 
Kind  alleges  upon  information  and  belief,  that  the  defendant  {name  of  the 

drawer),  for  value  received,  on  or  about  the  day  of. 

iQi ,  made  and  delivered  his  check  in  writing,  dated  that  day,  directed 

to  the  Bank,  thereby  directing  said  bank  to  pay 

{name  of  the  payee)  or  order,  the  sum  of 

dollars.     And  the  said  defendant {payee), 

for  value  received  thereafter  indorsed  said  check  and  delivered  the  same  to  the 
plaintiff  herein,  who  became  and  is  now  the  owner  and  holder  thereof.     That 

thereafter  the  said  check  was  duly  presented  to  the 

Bank,  where  by  the  terms  the  same  was  made  payable,  and  payment  thereof 
demanded,  which  was  refused,  and  said  check  was  thereupon  duly  protested 
for  such  non-payment,  of  all  which  the  defendants  had  due  notice,  and  the 

plaintiff  herein  paid dollars  and 

cents,  notary's  fees  of  protest.  That  defendants  have  not  paid  said  check  or 
any  part  thereof.  That  there  is  now  due  and  owing  thereon  from  the  defend- 
ants to  plaintiff  the  sum  of  dollars,  with  interest 

thereon  from  the  day  of  igi....,  besides    the    notary's 

fees  of  protest. 

That  all  the  parties  to  this  action,  are  now,  at  the  time  of  the  commence- 
ment of  this  action  residents  of  the  » 

County  of ,  in  the  State  of 

WHEREFORE  plaintiff  demands  judgment  against  defendants  for  the 

sum  of dollars,  with  interest  from  the 

day  of ,besides  protest  fees  and  the  cost  of  this  action. 


Plaintiff's  Attorney. 


188  NEGOTIABLE    INSTRUMENTS   LAW 

§  112.  Liability  of  acceptor.  The  acceptor  by  accepting 
the  instrument  engages  that  he  will  pay  it  according  to  the 
tenor  of  his  acceptance;  and  admits* 

1.  The  existence  of  the  drawer,  the  genuineness  of  his 
signature,  and  his  capacity  and  authority  to  draw  the  instru- 
ment; and 

2.  The  existence  of  the  payee  and  his  then  capacity  to 
indorse. 

Variant. — The  Missouri  statute  omits  the  word  "then"  in  Subd.  2. 


The  legal  meaning  of  acceptance  is  that  the  acceptor  engages  to  pay 
the  instrument  according  to  the  tenor  of  his  acceptance.  In  other  words 
it  is  a  promise  to  pay.  Up  to  the  time  of  the  acceptance  the  payee  looks 
exclusively  to  the  drawer. 

Bloomington  v.  Smith,  123  Ind.  41;  Industrial  Bank  v.  Bowes,  165 
111.  70;  Henerematte  v.  Morris,  101  N.  Y.  63. 

The  acceptor  by  his  acceptance  guarantees  the  genuineness  of  the 
drawer's  signature,  but  not  the  genuineness  of  any  other  names  upon  the 
paper  or  of  the  body  of  the  paper  in  respect  to  the  date  and  amount  thereof. 

Cleus  V.  Bank  of  N.  Y.  Banking  Ass'n.,  89  N.  Y.  422;  Holt  v.  Ross, 
54  N.  Y.  472;  White  v.  Continental  National  Bank,  64  N.  Y.  316;  National 
Reserve  Bank  v.  Corn  Exchange  Bank,  157  Supp.  316. 

"The  reason  usually  assigned  is,  that  when  the  bill  is  presented  for 
acceptance  the  acceptor  looks  to  the  handwriting  of  the  drawer  with  which 
he  is  presumed  to  be  acquainted,  and  he  affirmed  the  genuineness  by  giving 
credit  to  the  bill,  by  his  acceptance  in  favor  of  the  legal  holder  thereof. 
But  the  acceptor  cannot  be  presimied  to  have  any  such  knowledge  of  the 
other  facts  upon  which  the  rights  of  the  holder  may  depend." 

Story  on  Bills,  Sections  262,  263. 

In  analogy  to  this,  courts  have  held  that  the  certificate  only  holds 
the  bank  for  the  truth  of  the  facts  presumed  to  be  within  its  own  knowledge, 
viz:  the  genuineness  of  the  signature  of  the  drawer  and  the  state  of  his 
account.  Moneys  paid  upon  checks  and  drafts  which  have  been  forgeries, 
either  in  the  body  of  the  instrvunent  or  the  indorsements,  or  in  any  respect, 
except  the  name  of  the  drawer,  have  uniformly  been  held  recoverable  as 
for  money  paid  by  mistake. 

Canal  Bank  v.  Bank  of  Albany,  1  Hill  287;  Marine  National  Bank 
v.  National  City  Bank,  59  N.  Y.  69;  Continental  National  Bank  of  N.  Y. 
v.  Tradesmen's  National  Bank  of  New  York,  36  App.  Div.  112;  Danvers 
Bank  v.  Salem  Bank,  151  Mass.  280. 


LIABILITIES   OF    PAKTIES  189 

When  a  drawee  pays  a  check  upon  which  the  drawer's  signature  had 
been  forged,  he  cannot  upon  the  discovery  of  the  forgery,  recover  back 
the  amount  if  the  party  to  whom  he  paid  was  a  bona  fide  holder. 

Bank  v.  Bank,  17  Am.  St.  890  and  cases  cited;  First  National  Bank  v. 
Savings  Inst.  62  Barb.  101;  State  Bank  v.  Cimiberland  Trust  Co.,  168 
N.  C.  605. 

For  more  than  a  century  it  has  been  held  and  decided  without  question, 
that  it  is  incumbent  upon  the  drawee  of  a  bill  to  be  satisfied  that  the 
signature  of  the  drawer  is  genuine,  that  he  is  presumed  to  know  the  hand- 
writing of  his  correspondent;  and  if  he  accepts  or  pays  a  bill  to  which  the 
drawer's  name  has  been  forged,  he  is  boimd  by  the  act  and  can  neither 
repudiate  the  acceptance  nor  recover  the  money  paid. 

National  Park  Bank  v.  Ninth  National  Bank,  46  N.  Y.  77;  Title 
Guarantee  &  Trust  Co.  v.  Haven,  126  App.  Div.  (N.  Y.)  802;  First  National 
Bank  v.  Bank  of  Cottage  Grove,  59  Or.  388;  Trust  Co.  of  America  v. 
Hamilton  Bank,  127  App.  Div.  515;  Farmers  Bank  of  Augusta  v.  Farm- 
ers Bank  of  Maysville,  159  Ky.  141;  Iron  City  Bank  v.  Fort  Pitt  Bank, 
159  Pa.  St.  46. 

The  rule  that  one  who  accepts  a  negotiable  instrument  to  which  the 
drawer's  name  is  forged  is  bound  by  the  act  and  can  neither  repudiate 
the  acceptance  nor  recover  the  money  paid,  has  no  application  in  behalf 
of  one  who  has  acquired  the  paper  in  the  absence  of  any  consideration 
whatever  therefor  either  present  or  past. 

Title  Guarantee  &  Trust  Co.  v.  Haven,  196  N.  Y.  493;  Bank  of 
Danvers  v.  Salem  Bank,  151  Mass.  280. 

If  a  party  becomes  a  bona  fide  holder  for  value  of  a  bill  before  its 
acceptance,  it  is  not  essential  to  his  right  to  enforce  it  against  a  subsequent 
acceptor,  that  an  additional  consideration  should  proceed  from  him  to  the 
drawee.  The  bill  itself  a  representation  by  the  drawer  that  the  drawee 
is  already  in  receipt  of  funds  to  pay,  and  his  contract  is  that  the  drawee 
shall  accept  and  pay  according  to  the  terms  of  the  draft. 

Hentemiatte  v.  Morris,  101  N.  Y.  70. 

The  payment  of  a  bill  or  check  by  the  drawee  amoimts  to  more  than 
an  acceptance.  The  rule,  holding  that  such  a  payment  has  all  the  efficacy 
of  an  acceptance  is  founded  upon  the  principle  that  the  greater  includes 
the  less. 

Bank  v.  Bank,  141  Mo.  App.  719;  125  S.  W.  513;  Neal  v.  Coburn,  92 
Me.  139. 

An  acceptance  binds  the  acceptor  to  pay  the  bill,  and  he  cannot  be 
heard  to  deny  that  he  has  funds  in  his  hands  for  the  piu-pose.  A  payment 
of  a  bill  is  more  than  an  acceptance,  for  the  one  is  an  obligation  to  pay;  the 


190  NEGOTIABLE   INSTRUMENTS   LAW 

other  a  discharge  of  the  indebtedness  represented  by  such  bill.  If  the  one 
includes  the  drawee,  it  is  inconceivable  why  the  other  would  not.  Where 
the  holder  of  a  check  procures  it  to  be  accepted  or  certified,  the  indorsers 
are  discharged  from  Uability  and  the  bank  is  precluded  from  setting  up 
that  the  check  was  forgery. 

Title  Guarantee  Trust  Co.  v.  Haven,  126  App.  Div.  802;  Bank  of 
Rolla  v.  Salem  Bank,  141  Mo.  App.  719;  Farmers  Bank  v.  Rutherford 
Bank,  115  Tenn.  64;  Bank  of  Commerce  v.  Mech.  National  Bank,  148 
Mo.  App.   1. 

Most  of  the  courts  agree  that  one  who  purchases  a  check  or  draft  is 
bound  to  satisfy  himself  that  the  paper  is  genuine;  and  that,  by  indorsing 
it,  or  presenting  it  for  payment,  or  putting  it  into  circulation  before  pres- 
entation, he  impliedly  asserts  that  he  has  performed  his  duty.  The 
great  weight  of  authority  is  between  the  two  propositions;  that  is,  that 
notwithstanding  the  payee  has  accepted  the  check  and  paid  it,  yet  if  it  is 
afterwards  discovered  to  be  a  forgery  and  the  purchaser  of  the  check  took 
it  from  a  stranger  without  making  proper  inquiry  as  to  his  identity,  the 
payee  can  recover  from  the  purchaser  the  amount  of  the  check.  The 
courts  adopting  the  theory  that  the  payee  can  recover  where  it  is  shown 
that  the  piirchaser  of  the  check  was  guilty  of  negligence  in  taking  the  same 
are  numerous  and  among  them  are: 

First  National  Bank  v.  First  National  Bank,  151  Mass.  280;  Ford 
V.  Bank,  54  S.  E.  204;  10  L.  R.  A.  63;  National  Bank  v.  Bangs,  106  Mass. 
441. 

Drawees  of  a  draft  to  which  forged  bills  of  lading  were  attached  and 
of  which  the  draft  made  no  mention,  having  accepted  such  draft  obligated 
themselves  to  pay  it  according  to  their  acceptance. 

Springs  v.  Hanover  National  Bank,  145  App.  Div.  (N.  Y.)  188. 

The  subject  generally,  see.  Title  Trust  Co.  v.  Hayes,  214  N.  Y.  472; 
Title  Guarantee  Co.  v.  Hayes,  196  N.  Y.  493;  Carnegie  Trust  Co.  v.  First 
National  Bank,  213  N.  Y.  305;  Rouvant  v.  San  Antonio  Bank,  63  Tex. 
610;  ConsoHdated  National  Bank  v.  First  National  Bank,  129  App.  Div. 
(N.  Y.)  538. 

Complaint  against  acceptor,  maker  and  indorser  of  Bill  of  Exchange. 

{TITLE  OF  CAUSE) 

The  plaintiff  in  the  above  entitled  action  complains  of  defendants  and 

alleges  on  information  and  belief  that  the  defendant, 

at  ,  made  his  bill  of  exchange  or  draft  in  writing,  of  which 
the  following  is  a  copy:  {Copy  of  bill).  That  thereafter  the  defendant 
{acceptor)   accepted  said  draft  and  the  same 


LIABILITIES   OF   PAETIES  191 

was  for  value  received,  indorsed  by  the  defendant, 

(indorsee)  and  by  him,  for  value,  transferred  and  delivered  to  plaintiff  herein. 

That  at  maturity  the  payment  of  said  draft  was  duly  demanded,  which 
payment  was  refused,  and  the  same  was  thereupon  duly  protested  for  non- 
payment, and  notice  of  said  demand  and  non-payment  was  duly   given  to 

defendants  herein,  the  expense  of  which  protest  was 

dollars  and  cents. 

That  said  defendants  have  failed  to  pay  said  draft  or  any  part  thereof 

and  are  justly  indebted  to  plaintiff  thereon  in  the  sum  of 

dollars,  with  interest  from  the day  of ,  iqi ,  and 

dollars  protest  fees. 

WHEREFORE,  plaintiff  asks  judgment  in  said  amount,  besides  the 
cost  of  this  action. 


Plaintiff's  Attorney. 

§  113.  When  person  deemed  indorser.  A  person  plac- 
ing his  signatiire  upon  an  instrument  otherwise  than  as 
maker,  drawer  or  acceptor  is  deemed  to  be  an  indorser,  unless 
he  clearly  indicates  by  appropriate  words  his  intention  to  be 
bound  in  some  other  capacity. 

See  notes,  Section  114. 

This  rule  is  founded  upon  commercial  necessity.  The  unshackled 
circulation  of  negotiable  notes  is  a  matter  of  great  importance.  The 
different  forms  of  commercial  instruments  take  the  place  of  money.  To 
require  each  assignee,  before  accepting  them,  to  inquire  into  and  investigate 
every  circumstance  bearing  upon  the  original  execution  and  to  take  cog- 
nizance of  all  the  equities  between  the  original  parties,  would  utterly 
destroy  their  commercial  value  and  seriously  impede  business  transactions. 

By  this  section  the  presumption  as  established  by  the  courts  of  many 
of  the  states  was  changed,  and  an  irregular  indorser  is  now  presimied  to  be 
liable  in  accordance  with  the  express  language  of  the  statute. 

An  indorsement  made  by  means  of  a  rubber  stamp  is  valid  and  suf- 
ficient to  transfer  title  to  the  instrument  indorsed. 

Mayors  v.  McRimmon,  140  N.  C.  640,  53  S.  E.  Rep.  447. 

A  person  who  signs  his  name  in  blank  before  delivery,  upon  the  back 
of  a  draft,  payable  to  the  drawer,  which  has  been  accepted  by  the  drawee, 
is  an  indorser  within  the  meaning  of  this  section. 

Blanchard  &  Co.  v.  Haddock,  192  N.  Y.  499. 


192  NEGOTIABLE    INSTRUMENTS   LAW 

A  person  who  places  his  name  on  the  back  of  a  negotiable  note  before 
delivery,  was  an  indorser,  where  there  was  nothing  to  indicate  that  he 
intended  to  be  bound  in  any  other  capacity. 

Phoenix  Bank  v.  Hanlon,  166  S.  W.  (Mo.)  830. 

One  who  became  the  payee  of  a  note  and  indorsed  the  same  to  enable 
the  maker  to  negotiate  and  discount  it  for  his  own  benefit,  is  liable  as  an 
accommodation  indorser. 

Merchants  &  Farmers  Bank  v.  Katterjohn,  125  S.  W.  1071. 

A  person  who  indorsed  upon  the  back  of  the  note,  "I  hereby  guarantee 
payment  of  the  within  note"  was  not  an  "indorser,"  having  indicated  by 
the  appropriate  word  "guarantee"  his  intention  to  be  bound  in  that  capac- 
ity and  not  as  the  indorser. 

Noble  V.  Beeman  Co.,  65  Or.  93. 

The  fact  that  persons  who  signed  their  names  in  blank  upon  a  note 
given  by  a  corporation,  and  as  such  officers  executed  the  note  in  its  behalf, 
did  not  enlarge  their  individual  liability,  which  was  that  of  indorsers  only, 
who  could  not  be  held,  except  on  presentment,  demand  and  notice  of  non- 
payment by  the  principal. 

McDonald  v.  Luckenbach,  170  Fed.  434; 

The  legal  obligation  of  an  indorsing  payee  on  a  promissory  note  is 
that  of  an  indorser  only,  and  cannot  be  considered  or  proven  to  be  that  of  a 
maker. 

Burwell  v.  Gaylord,  119  Minn.  426;  First  National  Bank  v.  Payne, 
111  Mo.  291 ;  Finley  v.  Green,  85  111.  535;  Dubois  v.  Mason,  127  Mass.  37. 

An  indorsement  on  a  note,  "I  transfer  my  right,  title  and  interest  in 
the  same"  is  not  a  qualified  indorsement  and  does  not  limit  the  liability  of 
the  indorser. 

There  are  two  widely  divergent  lines  of  authority  in  cases  of  this  kind, 
one  line  holding  that  a  memorandum  of  similar  import  to  that  here  used 
exempts  the  indorser  from  personal  liability  or  constitutes  him  a  mere 
assignor.  One  of  the  leading  cases  sustaining  this  line  of  holding  is  Hailey 
V.  Falconer,  32  Ala.  536,  in  which  it  is  held  that  an  indorsement  in  these 
words : 

"For  value  received  this  28th  day  of  February,  1850,  I  transfer  unto 
John  P.  Hailey  all  my  right  and  title  in  the  within  note,  to  be  enjoyed  in 
the  same  manner  as  may  have  been  by  me." 

— exempts  the  indorser  from  personal  liability  on  the  note.  Another 
authority,  strongly  sustaining  this  line,  is  Spencer  v.  Halpem,  62  Ark.  595, 
37  S.  W.  711,  36  L.  R.  A.  120,  the  indorsement  in  that  case  being  in  these 
words : 


LIABILITIES    OF    PARTIES  193 

"For  value  received,  I  hereby  transfer  my  interest  in  the  within  note 
to  Isaac  Halpem,  Geo.  Spencer" 
— the  court  in  the  course  of  the  opinion  saying : 

"Had  the  payee  intended  to  be  bound  as  indorser,  why  use  so  many 
words?  Had  the  transferee  expected  more  than  'the  interest'  of  the 
transferor,  why  did  he  accept  the  instrument  transferring  only  his  interest? 
We  must  accept  and  interpret  the  completed  contract  as  the  parties  made 
it.  They  have  been  proper  to  express  it  at  length,  and  have  used  unam- 
biguous terms.  Construing  the  terms,  'my  interest,'  most  strongly  against 
the  transferor,  we  do  not  feel  authorized  to  say  they  mean  anything  more 
than  simply  'my  interest.'  " 

The  coiu-t  in  this  case  adopts  the  maxim,  "Expressio  unius  est  exclusio 
alterius,"  and  rejects  the  maxim,  "Expressio  eorum  quae  tacite  insunt 
nihil  operatur. ' '  This  line  is  further  sustained  by  Tiedeman  on  Commercial 
Paper,  265: 

"The  declaration  that  the  payee  assigns  or  transfers  all  his  right,  title 
and  interest  in  the  paper  would  seem  to  limit  in  a  most  effective  way  the 
right  acquired  by  the  transferee  to  those  which  the  transferor  had  therein, 
and  thus  prevent  the  writing  from  operating  as  an  indorsement." 

The  other  line  of  authority  is  to  the  effect  that  an  indorser,  in  order  to 
limit  his  personal  liability,  must  do  so  by  words  clearly  expressing  such 
intent.  Some  of  the  decisions  sustaining  this  line  are  as  follows:  The 
early  English  case  of  Richards  v.  Franklin,  9  Car.  &  P.  221,  cited  by  Mr. 
Tiedeman,  in  which  the  indorsement  was  in  these  words: 

"I  hereby  assign  this  draft  and  all  benefit  of  the  money  sectired  thereby 
to  John  Grainger  of  Bessilsleigh,in  the  county  of  Berks., laborer;  and  order 
the  within  named  Thomas  Fox  Hitchcock  to  pay  him  the  amoimt  and  all 
interest  in  respect  thereof." 

The  most  often  cited  authority  is  the  case  of  Sears  v.  Lantz  &  Bates 
et  al.,  47  Iowa,  658,  in  which  the  indorsement  was  in  these  words: 

"December  18th,  1876, 1  hereby  assign  all  my  right  and  title  to  Louis 
Meckley.     John  Bowman." 

— which  the  court  held  to  be  equivalent  to  an  indorsement  of  the  note, 
and  boimd  the  assignor  as  an  indorser,  the  court  following  the  earlier 
case  of  Sans  v.  Wood,  1  Iowa,  263,  in  which  the  same  holding  was  made 
upon  an  indorsement  in  these  words,  "I  assign  the  within  note  to  Miss 
Sarah  Coffin."  The  same  holding  is  made  in  the  case  of  Adams  v.  Blethen, 
66  Me.  19,  22  Am.  Rep.  547,  upon  a  similar  indorsement.  In  the  case  of 
Citizens'  National  Bank  v.  Walton,  96,  Va.  435,  31  S.  E.  890,  the  cotirt 
holds : 

"Writing  on  back  of  negotiable  note,  signed  by  one  of  its  two  payees, 
'For  value  received,  I  hereby  assign  and  transfer  to  F  all  right,  title,  and 


194  NEGOTIABLE    INSTRUMENTS   LAW 

interest  that  I  may  have  in  the  within  note,'  renders  him  liable  to  an  inno- 
cent holder  as  an  indorser,  and  not  as  an  assignor,  and  without  regard  to 
the  equities  between  him  and  the  other  payee,  though  F  be  such  payee." 

In  the  case  of  Markey  v.  Corey,  108  Mich.  184,  66  N.  W.  493,  36  L. 
R.  A.  117,  62  Am.  St.  Rep.  698,  it  is  held: 

"The  negotiability  of  a  promissory  note  is  not  destroyed  because  of 
an  indorsement  thereon  that  it  is  given  in  accordance  with  a  certain  con- 
tract, although  the  note  is  one  of  a  series  which,  by  the  terms  of  such  con- 
tract, were  to  become  payable,  at  the  option  of  the  payee,  on  failure  to 
pay  any  of  them." 

The  court  in  this  case  follows  the  Iowa  cases  above  referred  to,  and 
says: 

"The  usual  mode  of  transfer  of  a  promissory  note  is  by  simply  writing 
the  indorser's  name  upon  the  back,  or  by  writing  also  over  it,  the  direction 
to  pay  the  indorsee  named,  or  order,  or  to  him  or  bearer.  An  indorsement, 
however,  may  be  made  in  large  terms  and  the  indorser  be  held  liable  as 
such." 

The  Supreme  Coiut  of  Minnesota,  in  the  case  of  Maine  Trust  & 
Banking  Co.  v.  Patrick  J.  Butler,  45  Min.  506,  48  N.  W.  333,  12  L.  R.  A. 
370,  in  a  well-reasoned  case,  follows  the  doctrine  laid  down  in  Daniel  on 
Negotiable  Instrtmients,  and  cites  with  approval  the  Iowa  and  Maine 
cases  above  referred  to,  and  adopts  the  latter  maximum  referred  to  by  the 
Arkansas  court  in  the  case  of  Spenser  v.  Halpem,  supra.  In  the  case 
considered  by  the  Minnesota  coiut  the  indorsement  was  in  these  words : 

"For  value  received  I  hereby  assign  and  transfer  the  within  note, 
together  with  all  interest  in  and  all  rights  under  the  mortgage  securing 
the  same,  to  L.  D.  Cooke." 

— and  the  cotirt  held  that  this  was  not  a  qualified  indorsement,  and  that 
the  payee  was  liable  as  an  ordinary  indorser. 

A  person  signing  before  the  payee  indorsed  the  note  has  been  held 
under  this  section  to  be  an  indorser,  and  as  thus  warranting  the  capacity 
of  the  prior  parties  to  the  contract. 

Rockfield  v.  First  National  Bank,  77  Ohio  St.  311;  Yonkers  National 
Bank  v.  Mitchell,  156  App.  Div.  318. 

Parol  Evidence. — Considerable  diversity  of  decision  is  found  in  the 
reported  cases  where  the  record  presents  the  case  of  a  blank  indorsement 
by  a  third  party,  made  before  the  instrument  is  indorsed  by  the  payee  and 
before  it  is  delivered  to  take  effect,  the  question  being  whether  the  party 
is  to  be  deemed  an  original  promisor,  guarantor  or  indorser.  Irreconcilable 
conflict  exists  in  that  regard;  but  there  is  one  principle  upon  the  subject 
almost  universally  admitted,  and  that  is,  that  the  interpretation  of  the  con- 
tract ought  in  every  case  to  be  such  as  will  carry  into  effect  the  intention  of 


LIABILITIES    OF    PAKTIES  195 

the  parties,  and  in  most  cases  it  is  admitted  that  proof  of  facts  and  circum- 
stances which  took  place  at  the  time  of  the  transaction  are  admissible  to 
aid  in  the  interpretation  of  the  language  employed. 

Good  V.  Martin,  95  U.  S.  90;  Cavazos  v.  Trevino,  6  Wall.  773.  But  see, 
Bird  V.  Kay,  40  App.  Div.  (N.  Y.)  537;  Hodgens  v.  Jennings,  148  App. 
Div.  (N.  Y.)881. 

Parol  evidence  is  necessary  to  determine  whether  a  party  to  an  instru- 
ment, including  an  indorser  thereon,  is  an  accommodation  party,  and  also 
to  detennine  which  other  party  to  the  instrument  he  had  accoinmodated, 
and  the  true  intention  of  indorsers  as  between  themselves  can  be  shown  by 
parol  evidence. 

4  Am.  &  Eng.  Ency.  of  Law  (2nd  ed.)  492;  Guild  v.  Butler,  127  Mass. 
386;  Cady  v.  Shepard,  12  Wis.  639;  Witherow  v.  Stayback,  158  N.  Y.  649; 
Haddock  v.  Blanchard  &  Co.,  192  N.  Y.  500;  Germania  Bank  v.  Mariner, 
129  Wis.  544. 

The  statute  fixing  the  legal  effect  of  the  instrument,  parol  evidence 
may  not  be  received  to  give  it  a  different  effect. 

Rockfield  v.  First  National  Bank,  77  Ohio  St.  311 ;  Nimmel  v.  Weil,  95 
111.  App.  19;  Deahy  v.  Chouquet,  28  R.  I.  340;  Toole  v.  Crafts,  193  Mass. 
110;  Peck  v.  Eastern,  74  Conn.  456;  Gibbs  v.  Guaraglia,  75  N.  J.  Law,  168; 
Perry  v.  Taylor,  148  N.  C.  362;  First  National  Bank  v.  Bickel,  143  Ky.  754. 

Section  generally,  see,  Hibernia  Bank  v.  Dresser,  132  La.  532;  Wilson 
v.  Hendee,  74  N.  J.  Law,  646;  Mercantile  Bank  of  Memphis  v.  Busby, 
120  Tenn.  652;  Dubois  F.  Mason,  127  Mass.  37;  Roessle  v.  Lancaster,  130 
App.  Div.  (N.  Y.)  5;  Perry  v.  Taylor,  148  N.  C.  362;  Rockfield  v.  Bank, 
77  Oh.  St.  311. 

§  114.  Liability  of  irregular  indorser.  Where  a  person, 
not  otherwise  a  party  to  an  instrument,  places  thereon  his 
signature  in  blank  before  delivery,  he  is  liable  as  indorser  in 
accordance  with  the  following  rules: 

1.  If  the  instrument  is  payable  to  the  order  of  a  third 
person,  he  is  liable  to  the  payee  and  to  all  subsequent  parties. 

2.  If  the  instrument  is  payable  to  the  order  of  the  maker 
or  drawer,  or  is  payable  to  bearer,  he  is  liable  to  all  parties 
subsequent  to  the  maker  or  drawer. 

3.  If  he  signs  for  the  accommodation  of  the  payee,  he  is 
liable  to  all  parties  subsequent  to  the  payee. 

Variant. — The  Illinois  statute  substitutes  for  subdivisions  1  and  2  the 
following :  "  1 .  If  the  instrument  is  a  note  or  bill  payable  to  the  order  of  a 
third  person,  or  an  accepted  bill  payable  to  the  order  of  the  drawer,  he  is 


196  NEGOTIABLE   INSTEUMENTS   LAW 

liable  to  the  payee  and  to  all  subsequent  parties.  2.  If  the  instrument 
is  a  note  or  unaccepted  bill  payable  to  the  order  of  the  maker  or  drawer, 
or  is  payable  to  bearer,  he  is  liable  to  all  parties  subsequent  to  the  maker 
or  drawer." 


See  notes  Section  113. 

This  section  deals  only  with  the  liability  of  an  irregular  indorser  to 
the  payee  and  subsequent  parties,  and  does  not  define  the  rights  and  liabili- 
ties of  several  irregular  indorsers  as  between  themselves.  This  is  done 
by  section  118.     See  notes. 

Wilson  V.  Hendee,  74  N.  J.  L.  640. 

The  section  only  applies  to  those  who  place  their  signattu-e  as  indorsers 
"before"  delivery  to  the  payee. 

Kohn  V.  Butter  &  Egg  Co.,  30  Misc.  725,  63  N.  Y.  Supp.  265;  Bender 
v.  Bahr,  144  App.  Div.  (N.  Y.)  742. 

The  subject  covered  by  this  section  was  prior  to  the  adoption  of  the 
statute  subject  to  much  difference  of  opinion.  The  rule  formerly  followed 
by  most  of  the  states  has  been  that  the  presumption  is  that  a  person  making 
such  an  irregular  indorsement  intended  to  become  liable  as  second  indorser, 
and  that  on  the  face  of  the  paper,  without  explanation,  he  is  regarded  as 
second  indorser,  and  not  liable  to  the  payee,  who  is  supposed  to  be  the 
first  indorser.  But  it  is  competent  to  rebut  this  presimiption  by  parol 
proof  that  the  indorsement  was  made  to  give  the  maker  credit  with  the 
payee. 

Coulter  v.  Richmond,  59  N.  Y.  478. 

The  rule  followed  in  Phelps  v.  Vischer,  50  N.  Y.  69,  to  the  effect  that 
an  accommodation  indorser  of  a  promissory  note  is  not  liable  to  the  payee 
thereof,  unless  it  is  alleged  and  proved  that  the  accommodation  indorser 
indorsed  the  note  for  the  purpose  of  giving  the  maker  credit  with  the 
payee,  has  been  abrogated  by  this  section. 

Com  V.  Levy,  97  App.  Div.  (N.  Y.)  48;  Far  Rockaway  Bank  v.  Norton, 
186  N.  Y.  484,  affirming  110  App.  Div.  917;  Haddock  v.  Haddock,  192 
N.  Y.  499,  508. 

An  indorser 's  liability  is  contingent  upon  due  protest  and  notice 
thereof. 

Colonial  National  Bank  v.  Duerr,  108  App.  Div.  215;  Hayward  v. 
Empire  Sugar  Co.,  105  App.  Div.  31. 

Parol  evidence. — The  rule  relating  to  the  receipt  of  parol  evidence  to 
determine  the  primary  liability  as  between  persons  whose  names  appeared 
upon  the  instnmient  or  as  between  those  secondarily  liable  thereon  remains 
unchanged. 


LIABILITIES   OF   PAKTIES  197 

Haddock  v.  Haddock,  192  N.  Y.  499,  affg.  118  App.  Div.  412;  Far 
Rockaway  Bank  v.  Norton,  186  N.  Y.  484;  Gibbs  v.  Guaraglia,  75  N.  J. 
Law,  168;  American  Trust  Co.  v.  Canevin,  184  Fed.  Rep.  657;  Baumeister 
V.  Kiintz,  53  Fla.  340;  Russell  v.  Lancaster,  130  App.  Div.  (N  .Y.)  5; 
Franklin  v.  Kidd,  219  N.  Y.  409. 

Liability  of  partners  indorsing  individually. — A  partner  indorsing 
individually  is  a  party  different  from  the  partnership,  and  thereby  incurs  a 
double  liability  arising  from  two  distinct  contracts  by  which  he  has  bound 
himself. 

Roger  Williams  National  Bank  v.  Hall,  160  Mass.  171. 

In  Faneuil  Hall  National  Bank  v.  Meloon,  183  Mass.  66,  the  court 
said,  respecting  the  liability  of  partners  indorsing  a  partnership  note  as 
individuals,  that  they  "were  none  the  less  indorsers  and  none  the  less  liable 
as  such  because  they  were  also  liable  as  members  of  the  firm  which  made 
the  note." 

Foiirth  National  Bank  of  Boston  v.  Mead,  216  Mass.  521. 

Prior  to  the  adoption  of  the  negotiable  instrument  law  a  person 
indorsing  an  instrument  in  blank  before  delivery  was  deemed  a  second 
indorser,  and  hence  not  liable  to  the  payee,  who  was  considered  the  first 
indorser.  (Bacon  v.  Bumham,  37  N.  Y.  614.)  This  presimiption,  however, 
could  be  rebutted  by  proof  that  the  indorsement  was  made  for  the  purpose 
of  giving  the  maker  credit  with  the  payee. 

Coutler  V.  Richmond,  59  N.  Y.  478. 

Under  the  negotiable  instruments  law  one  who  indorses  a  note  prior 
to  its  delivery  to  the  payee  is  liable  as  an  indorser  only,  and  is  discharged 
unless  the  note  is  duly  presented  and  notice  of  dishonor  is  given. 

Rockfield  v.  First  National  Bank,  77  Ohio  St.  311,  83  N.  E.  Rep.  392; 
Blanchard  &  Co.  v.  Haddock,  192  N.  Y.  499,  692;  Phoenix  National  Bank 
V.  Hanlon,  Mo.,  166  S.  W.  Rep.  831 ;  Gibbs  v.  Guaraglia,  75  N.  J.  Law  168, 
^7  Atl.  Rep.  81;  J.  H.  Perry  &  Co.  v.  Taylor  Brothers,  148  N.  C.  363,  62  S. 
E.  Rep.  423;  Lewy  v.  Wilkinson,  La.,  64  So.  Rep.  1003;  Deahy  v.  Choquet, 
28  R.  I.  338,  67  Atl.  Rep.  421;  Farquhar  v.  Higham,  16  N.  D.  106;  Bau- 
meister V.  Kuntz,  Fla.,  42  So.  Rep.  886;  Third  National  Bank  v.  Bickel, 
Ky.,  137  S.  W.  Rep.  790. 

Under  the  California  Code  one  who  indorses  a  note  in  blank  before 
delivery  to  the  payee  is  liable  as  an  indorser  only  and  he  is  entitled  to  notice 
of  dishonor. 

Navajo  County  Bank  v.  Dolson,  163  Cal.  485,  126  Pac.  Rep.  153. 

In  Mississippi  one  who  indorses  a  note  in  blank  before  deHvery  to  the 
payee  is  liable  as  maker  and  is  not  entitled  to  notice  of  dishonor. 
Lindsay  v.  Parrott,  Miss.,  66  So.  Rep.  412. 


198  NEGOTIABLE   INSTRUMENTS   LAW 

Accommodation  indorser. — In  the  case  of  indorsement  for  value  of 
business  paper  the  indorsement  is  an  independent  contract  entered  into  by 
the  indorser  that  he  may  sell  the  note,  and  no  relation  of  principal  and 
surety  exists  between  him  and  the  maker.  Therefore,  the  only  obligation 
or  contract  on  which  he  can  sue  the  maker  is  that  expressed  in  the  instru- 
ment itself.  But  in  case  of  an  accommodation  indorsement  the  relation 
of  principal  and  surety  exists,  and  the  surety  has  a  right  to  pay  the  debt, 
thereby  cancelling  the  note  and  the  liability  of  the  maker  thereon,  and  then 
bring  his  action  upon  the  implied  promise,  independent  of  the  promise  of 
the  note  of  the  maker  to  reimburse  him.  In  such  case  the  indorser  when  he 
has  been  compelled  to  pay  the  note  has  a  right  of  action  against  the  maker 
on  an  implied  contract,  even  though  the  Statute  of  Limitations  has  run 
upon  the  note. 

Blanchard  v.  Blanchard,  201  N.  Y.  134. 

In  an  action  against  indorsers  of  a  promissory  note  who  sign  for  the 
accommodation  of  the  maker  before  the  note  was  indorsed  by  the  payee, 
the  defense  of  invalidity  and  v/ant  of  consideration  are  open  in  the  same 
way  that  they  would  be  against  the  maker. 

Leonard  v.  Draper,  187  Mass.  536;  Quinby  v.  Varnum,  190  Mass.  21L 

In  Franklin  v.  Kidd,  219  N.  Y.  409,Graydon  made  a  note  to  the  order 
of  defendant's  testator,  Kidd.  Franklin  indorsed  it  before  delivery  to  the 
payee.  The  note  was  not  paid,  and  the  Bank  of  Hamilton,  which  had  dis- 
counted it,  recovered  judgment  against  Franklin.  Later  Kidd,  the  payee, 
made  pa^nnent  to  the  bank  and  obtained  an  assignment  of  the  judgment. 
Franklin  now  says  that  he  indorsed  the  note  for  Klidd's  accommodation; 
that  as  between  Kidd  and  liimself,  the  former  was  the  primary  debtor; 
and  that  the  judgment  in  Kidd's  hands  is  no  longer  an  enforcible  obliga- 
tion.    He  asked,  therefore,  that  it  be  canceled. 

The  indorsement  of  the  note,  though  before  delivery,  gave  rise  to  a 
presumption  that  the  indorser  was  liable  to  the  payee  under  this  section. 
The  presumption  could,  however,  be  rebutted  by  evidence  that  the  indorse- 
ment was  in  truth  for  the  accommodation  of  the  payee. 

Haddock,  Blanchard  &  Co.  v.  Haddock,  192  N.  Y.  499. 

Since  the  statute  the  legal  presumption  is  changed  where  the  com- 
plaint alleges  that  the  irregular  indorsers  indorsed  the  paper  "before 
delivery"  to  the  payee.  And  when  this  fact  is  established  the  onus  is  cast 
upon  such  indorsers  to  allege  and  prove  that,  notwithstanding  such  delivery, 
the  payee  was  to  become  first  indorser  according  to  the  customary  form 
of  the  contract,  and  that  they  did  not  indorse  for  the  purpose  of  lending 
their  credit  to  the  maker  or  with  the  intention  of  becoming  hable  to  the 
payee.     That  this  is  the  proper  interpretation  of  the  act  is  obvious.     The 


LIABILITIES   OF    PABTIES  199 

true  intention  of  indorsers  as  between  themselves,  can  always  be  shown 
by  oral  evidence. 

Kohn  V.  ConsoUdated  B.  &  E.  Co.,  30  Misc.  726;  Dan.  Neg.  Int.  Sec. 
704;  4  Am.  &  Eng.  Ency.  of  Law  (2d  ed.)  492;  Guild  v.  Butler,  127  Mass. 
386;  Witherow  v.  Slayback,  158  N.  Y.  649;  Good  v.  Martin,  95  U.  S.  90; 
Cavazoo  v.  Trevino,  6  Wall.  773;  Cady  v.  Shepard,  12  Wis.  639;  Kohn 
v.  C.  Butter  &  Egg  Co.,  30  Misc.  725;  Rockaway  Bank  v.  Norton,  186 
N.  Y.  484. 

A  holder  in  due  course  of  a  promissory  note,  although  it  has  been 
materially  altered  without  the  consent  of  the  indorser,  may  enforce  pay- 
ment of  the  note  according  to  its  original  tenor  against  such  indorser,  if 
the  holder  was  not  a  party  to  the  alteration. 

Thorpe  v.  White,  188  Mass.  333. 

In  an  action  against  an  indorser  on  a  note,  the  indorsement  having 
been  made  before  delivery  of  the  note  to  the  payee,  it  is  material  under 
subdivision  3  whether  it  was  given  to  the  payee  for  a  valuable  consideration 
or  whether  it  was  given  to  him  merely  as  a  matter  of  accommodation. 

Howard  v.  Van  Geison,  56  App.  Div.  (N.  Y.)  217. 

It  was  not  the  intention  of  the  legislature  by  the  enactment  of  this 
section  to  establish  a  rule  as  to  the  liability  of  an  irregular  indorser  con- 
clusive on  the  parties  to  the  instrument  as  between  themselves  in  an 
action  where  the  facts  showing  a  different  intention  are  fully  alleged. 

Haddock  v.  Haddock,  192  N.  Y.  512;  118  App.  Div.  113;  Corn  v. 
Levy,  97  App.  Div.  48;  Guild  v.  Butler,  127  Mass.  386;  Cady  v.  Shepard, 
12  Wis.  639;  4  Am.  &  Eng.  Ency.  of  Law,  250. 

§  115.  Warranty;  where  negotiation  by  delivery  or  by 
a  qualified  indorsement.  Every  person  negotiating  an  in- 
strument by  delivery  or  by  a  qualified  indorsement,  warrants : 

1.  That  the  instrument  is  genuine  and  in  all  respects 
what  it  purports  to  be; 

2.  That  he  has  a  good  title  to  it; 

3.  That  all  prior  parties  had  capacity  to  contract; 

4.  That  he  has  no  knowledge  of  any  fact  which  would 
impair  the  validity  of  the  instrument  or  render  it  valueless. 

But  when  the  negotiation  is  by  delivery  only,  the  warranty 
extends  in  favor  of  no  holder  other  than  the  immediate  trans- 
feree. The  provisions  of  subdivision  three  of  this  section  do 
not  apply  to  persons  negotiating  public  or  corporate  securities, 
other  than  bills  and  notes. 


200  NEGOTIABLE   INSTRUMENTS   LAW 

See  notes  Section  117. 

An  instrument  which  is  negotiable  by  dehvery  is  one  which  is  either 
payable  to  bearer  or  has  been  indorsed  in  blank. 

Subd.  I. — Where  the  holder  of  a  promissory  note,  which  is  tainted 
with  usury,  transfers  the  same  for  a  valuable  consideration  without  indorse- 
ment and  without  representation  as  to  legality,  in  the  absence  of  knowledge 
on  his  part  at  the  time  of  the  transfer  of  the  defect,  no  warranty  against  it 
will  be  implied,  and  an  action  cannot  be  sustained  against  him  for  loss 
sustained  by  the  ptirchaser  by  reason  of  the  defect;  a  scienter  is  essential  to 
establish  an  implied  warranty  as  to  the  validity  of  the  note. 

Littauer  v.  Goldman,  72  N.  Y.  506. 

See  also,  Whitney  v.  National  Bank  of  Pottsdam,  45  N.  Y.  303; 
Bell  V.  Daggs,  60  N.  Y.  528;  Webb  v.  Odell,  49  N.  Y.  583;  Ross  v.  Terry, 
63  N.  Y.  613;  Mandeville  v.  Newton,  119  N.  Y.  14;  Meyer  v.  Richards, 
163  U.  S.  386. 

An  express  warranty  is  a  sale  maybe  so  framed  as  to  exclude  warranty 
implied  by  statute. 

Giffert  V.  West,  37  Wis.  115. 

Subd.  2. — A  person  who  sells  commercial  paper  as  his  own  is  imder- 
stood  to  warrant  his  title  thereto  to  be  good  and  that  the  instnmient  is 
genuine. 

M.  N.  Bank  v.  Gallaudet,  120  N.  Y.  303;  Delaware  Bank  v.  Jarvis, 
20  N.  Y.  226;  Littauer  v.  Goldman,  72  N.  Y.  506. 

In  Story  on  Promissory  Notes,  Section  118,  it  is  said  that  the  holder 
warrants  by  implication,  unless  otherwise  agreed,  that  he  is  the  lawful 
holder  and  has  title;  that  the  instnmient  is  genuine,  and  not  forged  or 
fictitious. 

Subd.  3. — In  Thrall  v.  Newell,  19  Vt.  202,  where  the  note  was  invalid, 
as  one  of  the  signers  was  insane,  and  had  successfully  defended  on  that 
groimd,  the  case  turned  somewhat  upon  the  construction  to  be  given  to  a 
written  assignment  to  the  plaintiff,  which  it  was  held  must  be  construed 
as  an  expressed  warranty  on  the  part  of  the  defendant  that  it  was  a  valid 
note,  and  that  the  signers  were  of  sufficient  capacity  to  contract. 

Subd.  4. — It  is  a  fraudulent  suppression,  avoiding  the  sale  of  com- 
mercial paper,  for  the  vendor  to  withold  information  that  the  maker's 
check,  upon  the  bank  in  which  they  kept  their  account,  had  been  protested, 
though  the  vendor's  informant  accompanied  his  statement  with  the  expres- 
sion of  his  opinion  that  the  makers  were  perfectly  solvent. 

Brown  v.  Montgomery,  20  N.  Y.  287. 

Where  in  an  action  upon  negotiable  paper  the  plaintiff  appears  as  a 
purchaser  for  full  value  before  maturity,  the  burden  of  proving  that  he  had 


LIABILITIES   OF   PAKTIES  201 

notice  of  any  fraud  on  the  part  of,  or  unauthorized  use  of  the  paper  by  the 
original  holder,  is  upon  the  defendant. 

Dalrymple  v.  Hellenbrand,  62  N.  Y.  6;  Frank  v.  Lanier,  91  N.  Y.  112. 

Saving  Clause. — The  assignee  of  a  promissory  note  who  obtains  title 
from  the  payee  without  indorsement  holds  it  subject  to  all  equities  and 
defenses  existing  between  the  original  parties  even  though  he  pays  full 
consideration. 

Steinberger  v.  Hittleman,  93  Misc.  105. 

Where  one  who  transfers  paper  by  delivery  only  incurs  none  of  the 
liabilities  which  attach  to  an  indorser  for  the  reason  that  the  infeience  is 
that  he  transfers  it  and  it  is  received  without  his  indorsement,  such  liabili- 
ties did  not  enter  into  the  bargain  or  the  intention  of  the  parties.  He  only 
warrants  that  he  has  title  or  is  lawfully  entitled  to  dispose  of  it. 

3  R.  C.  L.  1164;  Littauer  v.  Goldman,  72  N.  Y.  506;  Baxter  v.  Duren, 
29  Me.  434. 

§  1 1 6.  Liability  of  general  indorser.  Every  indorser 
who  indorses  without  qualification,  warrants  to  all  subsequent 
holders  in  due  course: 

1.  The  matter  and  things  mentioned  in  subdivisions  one, 
two  and  three  of  the  next  preceding  section ;  and, 

2.  That  the  instrument  is  at  the  time  of  his  indorsement 
valid  and  subsisting. 

And,  in  addition,  he  engages  that  on  due  presentment,  it 
shall  be  accepted  or  paid,  or  both,  as  the  case  may  be,  accord- 
ing to  its  tenor,  and  that  if  it  be  dishonored,  and  the  necessary 
proceedings  on  dishonor  be  duly  taken,  he  will  pay  the  amount 
thereof  to  the  holder,  or  to  any  subsequent  indorser  who  may 
be  compelled  to  pay  it. 

Variant. — The  Illinois  statute  adds  "not  an  accommodation  party" 
between  the  words  "indorser"  and  "who"  in  the  first  line;  adds  "and  four" 
after  "three"  in  subdivision  one  and  substitutes  "every  indorser"  for  "he" 
in  the  first  line  of  the  last  paragraph. 


The  warranty  of  genuineness  of  a  note  applies  only  to  the  condition 
of  the  instnmient  on  leaving  the  hands  of  the  indorser,  and  the  indorser 
is  not  liable  for  changes  which  were  thereafter  made  by  the  maker,  without 
his  knowledge. 

First  National  Bank  v.  Gridley,  112  App.  Div.  (N.  Y.)  398. 


202  NEGOTIABLE    INSTRUMENTS    LAW 

The  full  contract  which  the  law  implies  from  the  indorsement  of  a 
negotiable  promissory  note  on  the  part  of  the  indorser,  with  the  indorsee 
and  every  subsequent  holder  to  whom  it  is  transferred  is,  (a)  that  the 
instrument  itself  and  the  antecedent  signatures  thereon  are  genuine;  (b) 
the  indorser  has  a  good  title  to  the  instrument ;  (c)  that  he  is  competent  to 
bind  himself  by  the  indorsement  as  indorser;  (d)  that  the  maker  is  com- 
petent to  bind  himself  to  the  payment  and  upon  due  presentment  of  the 
note  pay  it  at  matiuity ,  or  when  it  is  due ;  (e)  that  if,  when  duly  presented, 
it  is  not  paid  by  the  maker  the  indorsee  will,  upon  due  and  reasonable 
notice  given  him  of  the  dishonor,  pay  the  same  to  the  indorsee  or  other 
holder. 

Binney  v.  Globe  National  Bank,  150  Mass.  574,  6  L.  R.  A.  379; 
Spencer  v.  Allerton,  60  Conn.  410;  Wheeler  v.  Traders  Bank,  107  Ky.  653, 
49  L.  R.  A.  315. 

Where  a  note  was  non-negotiable,  the  writing  of  the  name  of  the 
transferee  on  the  back  of  it  operated  as  an  assignment  only  without 
further  liability. 

Bright  V.  Offield,  143  Pac.  (Wash.)  159. 

The  fact  that  the  name  of  the  maker  was  forged  will  not  discharge  the 
indorser. 

Lennon  v.  Grauer,  159  N.  Y.  433;  Harris  v.  Fowler,  59  App.  Div. 
(N.  Y.)  522;  Wilhamsburg  Trust  Co.  v.  Tum  Suden,  120  App.  Div.  (N.  Y.) 
518;  National  Bank  of  Danvers  v.  National  Bank  of  Salem,  151  Mass.  281. 

One  who  indorses  checks  for  deposit  guarantees  the  validity  of  prior 
indorsements,  including  one  alleged  to  have  been  forged. 

Geering  v.  Metropolitan  Bank,  170  App.  Div.  751. 

The  indorser  of  negotiable  paper  does  not,  by  his  indorsement,  warrant 
to  the  drawee  of  the  genuineness  of  the  signature  of  the  drawer,  but  his 
indorsement  extends  such  warranty  only  to  subsequent  holders  in  due 
course. 

Farmers'  &  Merchants'  Bank  v.  Rutherford,  115  Tenn.  64. 


LIABILITIES    OF    PAKTIES  203 

(INDORSED) 
MICHAEL  LUMBRANO 

Where  a  note  was  made  in  the  firm  name,  and  before  deHvery  a  mem- 
ber of  the  partnership  placed  his  name  on  the  back  of  the  note,  under  this 
section  he  thereby  added  to  his  habihty  as  maker  a  several  and  distinct 
HabiHtyas  indorser,  thereby  making  himself  individually  Hable  for  the  pay- 
ment of  the  note,  after  due  notice  of  dishonor,  and  also  guaranteeing  the 
signature  on  the  face  of  the  note,  and  rendering  himself  liable  individually 
to  an  action  by  an  indorsee. 

National  Exchange  Bank  v.  Lumbrano,  29  R.  I.  64. 

The  indorsement  of  a  promissory  note  implies  a  guaranty  by  the  in- 
dorser that  the  maker  was  competent  to  contract  in  the  character  in  which 
by  the  terms  of  the  note  he  purported  to  contract.  The  indorser  cannot 
set  up  the  incapacity  of  the  maker  for  the  purpose  of  defeating  his  own 
liability. 

Young's  Estate,  234  Pa.  St.  287. 

One  who  indorses  a  promissory  note,  purporting  to  be  executed  by  a 
co-partnership,  thereby  impliedly  contracts  that  the  note  was  m.ade  by 
the  firm  in  whose  name  it  is  executed,  and  he  cannot  dispute  the  fact  in 
an  action  upon  his  indorsement. 

Dalrymple  v.  Hillenbrand,  62  N.  Y.  5. 

Alteration. — The  indorsem.ent  of  all  the  payees  of  a  promissory  note 
is  necessary  to  give  good  title  to  a  transferee,  and  hence  an  indorser  of  a 
note  made  payable  to  several  payees  is  not  liable  to  a  transferee  thereof, 
when  the  maker  without  authority  from  or  knowledge  of  the  indorser  has 
altered  the  note  before  negotiation  by  striking  out  the  name  of  one  payee 
and  substituting  his  own  name  as  payee  thereon. 

National  Bank  of  City  of  Brooklyn  v.  Gridley,  112  App.  Div.  (N.  Y.) 
398. 

If  the  note  be  raised  by  the  maker,  without  the  knowledge  of  the 
accommodation  indorser,  subsequent  to  such  indorsement  the  accommo- 
dation indorser  is  only  liable  for  the  amount  of  the  note  as  indorsed  by 
him. 

Packard  v.  Windholz,  88  App.  Div.  (N.  Y.)  365,  affirmed  180  N;  Y. 
549;  National  Park  Bank  v.  Seaboard  Bank,  114  N.  Y.  28;  N.  Y.  Produce 
Exchange  Bank  v.  Twelfth  Ward  Bank,  135  App.  Div.  (N.  Y.)  52. 

By  indorsing  his  name  on  the  back  of  a  note  and  delivering  it  in  that 
form  to  the  holder,  the  maker  does  not  become  an  indorser.  His  signature 
on  the  back  being  an  essential  part  of  its  execution  and  his  liability  is  that 
of  maker  only.  He  does  not  thereby  enter  into  the  contract  of  an  indorser, 
which  is  to  pay  the  note  if    the  maker,  upon   demand,  fails  to  do  so  at 


204  NEGOTIABLE    INSTRUMENTS   LAW 

maturity,  and  due  notice  thereof  is  given.  It  would  be  a  useless  ceremony, 
if  not  an  absurdity,  to  require  the  holder  to  make  a  demand  of  the  maker 
and  give  him  notice  of  his  own  default  in  order  to  charge  him  with  the 
pa>Tnent  of  the  note.  He  is  liable  as  maker  without  demand  and  notice 
and  sustains  no  other  legal  relation  to  the  paper. 

Ewan  V.  Brooks,  55  Ohio  St.  596;  35  L.  R.  A.  786;  3  R.  C.  L.  1179. 

Counterclaim  and  set-off. — While  the  indorser  of  a  promissory  note 
is  said  to  be  secondarily  liable,  the  holder  of  a  note  may  sue  both  the  maker 
and  indorser,  or  either,  and  the  indorser  sued  upon  his  contract  of  indorse- 
ment is  absolutely  liable  thereon.  Where  the  indorser  is  himself  sued,  he 
may  plead  as  a  set-off  the  indebtedness  of  the  holder  to  him. 

Curtis  V.  Davidson,  215  N.  Y.  395;  Building  &  Engineering  Co.  v. 
Northern  Bank  of  N.  Y.,  206  N.  Y.  400;  Armstrong  v.  Warner,  49  Oh.  St. 
376,  390;  Van  Wagoner  v.  Paterson  Gas  Co.,  23  N.  J.  Law,  283;  County 
National  Bank  v.  Massey,  192  U.  S.  138,  148;  Scott  v.  Armstrong,  146 
U.  S.  499,  510;  Hughitt  v.  Hayes,  136  N.  Y.  163,  167;  Carnige  Trust  Co. 
v.  Kistler,  89  Misc.  N.  Y.  404. 

An  indorser  who  is  also  maker  merely  warrants  the  genuineness  of  his 
own  contract. 

Sabine  v.  Paine,  166  App.  Div.  10. 

Indorsement  by  executor. — An  executor,  even  if  vested  with  full 
authority  by  the  probate  of  the  will  and  the  issuance  of  letters  testamentary, 
has  no  power  to  bind  the  estate  by  making  a  contract  of  indorsement. 

Schmittler  v.  Simon,  101  N.  Y.  554;  Packard  v.  Dunfee,  119  App. 
Div.  (N.  Y.)  601. 


r;0w^^^/^;^W?^ 


^. ^jt^ Vfe^^  y/oirv^A rf  ^ 


\<jcg^>'V^ 


{INDORSED) 
SAMUEL  GREEN  EXR. 
GEO.  W.  MAY 

Neither  executors  or  administrators  have  power  to  bind  the  estate 
represented  by  them  through  an  executory  contract,  having  for  its  object 


LIABILITIES   OF   PAKTIES 


205 


the  creation  of  a  new  liability,  not  founded  upon  the  contract  or  obligation 
of  the  testator  or  intestate.  They  take  the  property  as  owners  and  have 
no  principal  behind  them  for  whom  they  can  contract.  The  title  vests 
in  them  for  the  purpose  of  administration  and  they  must  account  as 
owners  to  the  persons  ultimately  entitled  to  distribution.  In  this  case 
Samuel  Green  would  be  liable  personally  as  an  indorser,  the  addition  of 
the  word  "Exr."  after  his  name  is  merely  descriptive.  The  estate  which  he 
may  represent  would  in  no  way  be  liable  under  the  form  of  the  indorse- 
ment regardless  of  his  lack  of  authority  to  indorse  in  behalf  of  the  estate. 

Schmittler  v.  Simon,  101  N.  Y.  554;  Connor  v.  Clark,  12  Cal.  168; 
Foster  v.  Fuller,  6  Mass.  758;  Wilcox  v.  Dwyer,  132  Mass.  285. 

Where  in  an  action  against  the  maker  and  indorsers  of  a  promis- 
sory note  it  appears  that  the  note  was  indorsed  for  the  accommodation  of 
the  maker  before  its  delivery  and  negotiation  for  value,  the  defense  of 
usiiry  is  available  to  the  indorsers.  This  section  applies  only  to  cases 
between  a  holder  and  an  indorser  as  such,  the  warranty  by  the  indorser 
nms  only  to  a  holder  in  due  course. 

Brunck  v.  Lambeck,  63  Misc.  117. 

The  defense  of  want  of  consideration  is  also  available. 

Leonard  v.  Draper,  187  Mass.  536. 

An  indorser  of  a  note  who,  upon  the  default  of  the  maker,  satisfies  the 
demands  of  the  indorsee  and  takes  up  the  note,  becomes  the  lawful  holder 
and  may  enforce  the  terms  of  the  contract  against  all  prior  indorsers  who 
have  been  notified  of  the  dishonor,  as  well  as  against  the  maker. 

Ainslie  v.  Wilson,  7  Cow.  (N.  Y.)  247;  Abraham  v.  Mitchell,  112  Pa. 
St.  230;  Sheahan  v.  Davis,  27  Ore.  278,  40  Pac.  405. 

Every  indorser  on  a  note  or  bill  is  liable  for  its  payment.  Each  party 
in  the  following  diagram  is  responsible  to  each  one  below  him : — 


In  a  Note. 

Accepted  Draft. 

Certified  Check. 

1.  Maker. 

2.  1st  Indorser. 

3.  2nd  Indorser. 
Etc. 

1.  Acceptor. 

2.  Drawer. 

3.  1st  Indorser. 

4.  2nd  Indorser. 
Etc. 

1.  The  Bank. 

2.  1st  Indorser. 

3.  2nd  Indorser. 
Etc. 

Parol  evidence. — An  unqualified  indorser  of  a  secured  installment 
note  cannot  vary  his  contract  of  indorsement  by  parol  evidence  that  the 
indorsee  at  the  time  of  the  indorsement  agreed  to  keep  him  advised  respect- 
ing the  time  and  amount  of  payments  and  failed  to  do  so. 


206  NEGOTIABLE   INSTRUMENTS   LAW 

Hopkins  v.  Merrill,  79  Conn.  637;  Smith  v.  Caro,  9  Ore.  278;  Goldman 
V.  Davis,  23  Cal.  256. 

In  an  action  by  a  holder  in  due  course  of  a  negotiable  promissory  note 
indorsed  by  the  payee  in  blank,  against  such  payee  as  indorser,  it  is  no 
defense  that  it  was  orally  agreed  that  said  indorsement  was  to  be  without 
recourse  to  him. 

Aronson  v.  Nurenberg,  218  Mass.  376;  Eaton  v.  McMahon,  42  Wis. 
484;  Charles  v.  Denis,  42  Wis.  56. 

Whether  or  not  the  rule  forbidding  parol  evidence  to  vary  the  terms 
of  a  written  instnmient  is  to  be  deemed  to  apply  to  actions  upon  notes 
between  the  parties  thereto,  has  no  application  to  actions  between  the 
makers  or  obhgees  of  notes  for  contribution.  In  such  case  the  action  is 
upon  a  different  and  collateral  agreement,  and  proof  or  oral  collateral 
agreement  that  as  between  themselves  the  parties  shall  stand  in  a  different 
relation  from  that  which  would  be  inferred  from  the  form  of  the  instnmient 
which  is  signed,  or  even  from  that  which  is  expressed  in  explicit  terms  upon 
the  face  of  such  instnmient,  does  not  have  the  effect  to  contradict  or  vary 
its  terms.  The  written  instrument  is  designed  to  express  the  undertaking 
and  obligation  of  the  signers  to  the  holder  and  is  not  designed  to  show 
their  agreement  or  imderstanding  among  themselves. 

Mansfield  v.  Edwards,  136  Mass.  15;  WilHams  v.  Glenn,  92  N.  C. 
253;  53  Am.  R.  416;  Bulkeley  v.  House,  62  Conn.  459;  21  L.  R.  A.  247. 

§  117.  Liability  of  indorser  where  paper  negotiable  by 
delivery.  Where  a  person  places  his  indorsement  on  an  in- 
strument negotiable  by  delivery  he  incurs  all  the  liabilities 
of  an  indorser. 

This  section  seems  to  be  declaratory  of  the  law. 

Cover  v.  Meyers,  75  Md.  406;  Dan.  Neg.  Inst.  Law,  Sec.  663a,  707a. 

§  118.  Order  in  which  indorsers  are  liable.  As  respects 
one  another,  indorsers  are  liable  prima  facie  in  the  order  in 
which  they  indorse ;  but  evidence  is  admissible  to  show  that  as 
between  or  among  themselves  they  have  agreed  otherwise. 
Joint  payees  or  joint  indorsees  who  indorse  are  deemed  to 
indorse  jointly  and  severally. 

Variant. — The  Illinois  statute  substitutes  for  the  last  sentence  the 
following:  "All  parties  jointly  liable  on  a  negotiable  instrument  are 
deemed  to  be  jointly  and  severally  liable." 

This  section  is  substantially  a  re-enactment  of  the  law  as  established 
by  the  following  cases : 


LIABILITIES    OF    PAETIES  207 

Moore  v.  Cross,  19  N.  Y.  227;  Coulter  v.  Richmond,  59  N.  Y.  475; 
Culliford  V.  Walser,  158  N.  Y.  65;  Davis  v.  Bly,  164  N.  Y.  527. 

In  the  absence  of  contrary  proof,  the  parties  to  a  promissory  note  are 
liable  thereon  according  to  the  legal  effect  of  the  instrument;  that  is,  the 
maker  is  liable  to  the  payee  and  indorsers,  the  payee  to  the  indorsers,  and 
each  indorser  to  the  subsequent  indorsees. 

Brewing  Co.  v.  Canning,  210  Mass.  285. 

Liability  of  indorsers. — Where  a  second  indorser  of  a  promissory 
note  has  paid  and  taken  it  up,  he  becomes  a  holder  for  value  and  may 
maintain  an  action  to  recover  the  amount  thereof  of  the  first  indorser, 
although  both  are  accommodation  indorsers. 

Kelly  V.  Burroughs,  102  N.  Y.  93. 

In  an  action  by  the  holder  of  a  promissory  note  against  an  indorser 
a  defense  alleging  that  the  plaintiff  made  false  representations  to  induce 
defendant  to  make  certain  purchases  for  which  the  notes  were  given  is 
insufficient  in  law  in  the  absence  of  an  allegation  that  the  representations 
were  false  to  the  knowledge  of  the  plaintiff  when  made. 

Hodges  V.  Jennings,  148  App.  Div.  (N.  Y.)  880;  Reinhart  v.  Schall, 
69  Md.  252. 

Where  one  makes  his  own  note  for  the  accommodation  of  the  payee 
and  one  or  more  subsequent  indorsers,  and  is  compelled  to  pay  the  note 
at  its  maturity  to  a  bona  fide  holder  for  value,  he  may  recover  from  the 
parties  for  whose  accommodation  he  made  the  note  the  amount  so  paid 
with  interest. 

Morgan  v.  Thompson,  72  N.  J.  L.  244;  see  also,  Haddock  v.  Haddock, 
118  App.  Div.  (N.Y.)  413. 

One  who  obtains  possession  of  a  bill  or  note  after  indorsing  it,  is 
restored  to  his  original  position,  and  cannot,  nor  can  a  purchaser  from  him 
with  notice,  hold  intermediate  indorsers  liable  who  could  look  to  him 
again,  and  when  such  indorsements  are  in  blank,  parol  evidence  is  ad- 
missible to  show  the  relations  in  which  they  stand. 

Moore  v.  First  National  Bank,  120  Am.  St.  Rep.  126;  Adrian  v. 
McCaskill,  103  N.  C.  181;  Garden  City  Bank  v.  Fitler,  155  Pa.  210; 
Bemey  v.  Steiner,  54  Am.  St.  Rep.  (Ala.)  144. 

Order  of  Liability. — In  the  case  of  an  accommodation  note  the  payee 
who  was  the  first  indorser  is  considered  as  having  lent  his  name  to  the 
maker  on  the  credit  of  the  latter  alone;  the  second  indorser  as  having  lent 
his  name  upon  the  credit  of  the  maker  and  the  prior  indorser,  and  so  every 
subsequent  indorser  as  having  lent  his  name  upon  the  credit  of  those  who 
became  parties  to  the  note  before  him. 

Russ  V.  Sadler,  197  Pa.  St.  51;  Wolf  v.  Hostetter,  182  Pa.  St.  292. 


208  NEGOTIABLE   INSTRUMENTS   LAW 

Every  indorser  is  liable  directly  to  the  holder  of  the  instrument. 
If  the  holder  elects  to  demand  payment  of  the  last  indorser  first,  it  becomes 
the  latter's  duty  to  meet  his  obligation  and  his  right,  on  doing  so,  to  look 
to  prior  indorser  for  re-payment  of  the  amount  due  thereon. 

Bank  of  America  v.  Wilson,  186  Mass.  214. 

Liability  of  ofl&cers  indorsing. — Where  officers  and  stockholders  of  a 
corporation  indorse,  as  officers  and  individuals,  a  note  made  by  the  corpora- 
tion they  are  not  Hable  as  a  matter  of  law  in  the  order  in  which  they 
indorse.  The  circumstances  raise  a  question  of  fact  as  to  whether  it  was 
not  the  intention  of  the  parties  to  become  jointly  liable  as  sureties. 

Strasburger  v.  Myer  Strasburger  &  Co.,  152  N.  Y.  Supp.  757,  167 
App.  Div.  198;  George  v.  Bacon,  138  App.  Div.  208. 

Special  agreement. — Such  agreement  need  not  be  established  by 
proof  of  a  formal  contract.  It  is  sufficient  if  the  surrounding  circumstances 
indicate  that  the  indorsements  were  made  upon  an  imderstanding  that  all 
indorsers  should  participate  in  the  liability.  Thus  where  several  parties 
indorsed  a  note  to  enable  a  stranded  theatrical  company  to  get  home, 
and  to  give  the  instrviment  credit  with  the  bank,  so  that  all  are  equally 
benefited,  a  prior  indorser  who  has  been  compelled  to  pay  may  maintain 
an  action  against  a  subsequent  indorser  for  contribution. 

George  v.  Bacon,  138  App.  Div.  (N.  Y.)  208. 

It  was  sufficient  if  it  appeared,  taking  all  the  circumstances  into 
account,  that  was  the  nature  of  the  liability  which,  as  between  them- 
selves, the  parties  intended  to  assume  and  did  assume. 

Weeks  v.  Parsons,  176  Mass.  570,  575;  Hagerthy  v.  Phillips,  83  Me. 
336;  Cook  v.  Brown,  62  Mich.  473;  Trego  v.  Cunningham,  267  111.  378. 

The  above  rule  has  no  practical  application  to  accommodation  in- 
dorsers, where  neither  of  them  has  ever  owned  the  paper  and  no  transfer 
by  indorsement  has  been  made. 

Easterly  v.  Barber,  66  N.  Y.  433,  437. 

The  mere  fact  that  the  indorsers  are  accommodation  indorsers  is  not 
sufficient  to  change  the  rule  that  prior  indorsers  are  liable  in  solido  to 
subsequent  indorsers  who  have  paid  the  note,  but  an  express  agreement 
is  necessary  to  render  them  liable  ratably  as  between  themselves. 

In  re  McCord,  174  Fed.  Rep.  72;  McCarty  v.  Roots,  62  U.  S.  432; 
Kelly  V.  Burroughs,  102  N.  Y.  93;  Egbert  v.  Hanson,  34  Misc.  596;  Easter- 
ly V.  Barber,  66  N.  Y.  433,  437. 

Where  several  parties  indorse  a  promissory  note  to  enable  a  stranded 
theatrical  company  to  get  home  and  to  give  the  instniment  credit  with  a 
bank  so  that  all  are  equally  benefited,  a  prior  indorser  who  has  been  com- 


LIABILITIES   OF   PARTIES  209 

pelled  to  pay  may  maintain  an  action  against  a  subsequent  indorser  for 
contribution. 

George  v.  Bacon,  138  App.  Div.  (N.  Y.)  208;  Weeks  v.  Parsons,  176 
Mass.  570,  575;  Haggarty  v.  Phillips,  83  Maine  336. 

Parol  evidence. — The  true  intention  of  indorsers — as  between  them- 
selves— can  be  shown  by  oral  evidence. 

4  Am.  &  Eng.  Ency.  of  Law  (2d  ed.)  492;  Guild  v.  Butler,  127  Mass. 
386;  Cady  v.  Shepard,  12  Wis.  639;  Witherow  v.  Slayback,  158  N.  Y.  649; 
Haddock  v.  Haddock,  192  N.  Y.  513;  Noble  v.  Beeman,  65  Ore.  93;  1  Am. 
&  Eng.  Ency.  Law,  (2d  ed.)  356. 

In  an  action  by  an  indorser  of  a  promissory  note,  who  has  paid  the 
same,  against  a  prior  indorser,  it  is  competent  to  prove  by  parol  that  all 
the  indorsers  were  accommodation  indorsers,  and  by  agreement  they 
were,  as  between  themselves,  co-sureties. 

Easterly  v.  Barber,  66  N.  Y.  433. 

As  between  the  original  parties,  the  apparent  rights  of  the  indorser 
on  the  face  of  the  note  and  the  contract  of  indorsement  may  be  qualified 
and  changed  by  parol  evidence,  and  the  intention  of  the  parties  established 
by  showing  the  facts  and  circumstances  of  the  transaction. 

Witherow  v.  Slayback,  158  N.  Y.  649;  Good  v.  Martin,  95  U.  S.  90; 
Patch  V.  Washburn,  82  Mass.  82;  Breneman  v.  Fumiss,  90  Pa.  St.  186. 

The  burden  of  proof  is  on  the  plaintiff  to  show  the  alleged  agreement. 
Goldman  v.  Goldberger,  208  Fed.  879. 

In  an  action  brought  on  behalf  of  one  indorser  of  a  note  against  one 
of  two  other  indorsers,  the  defendant  may  be  allowed  to  show  that  the 
indorsements  were  for  accommodation,  and  that  by  an  oral  agreement 
among  the  indorsers  his  liability  in  no  event  was  to  exceed  one-third  of  the 
amount  at  any  time  due  on  the  note ;  and  if  such  an  agreement  is  proved, 
his  liability  is  governed  thereby,  irrespective  of  the  order  in  which  the 
indorsers  signed  the  note. 

Shea  V.  Vahey,  215  Mass.  80;  Lewis  v.  Monahan,  173  Mass.  122. 

Evidence  is  admissible  to  show  that,  at  the  time  of  an  indorsement 
of  a  note,  the  first  and  second  indorsers  agreed  that  in  case  of  a  loss  they 
should  bear  it  jointly. 

Ross  V.  Espy,  66  Pa.  St.  481;  5  Am.  Rep.  394. 


210  NEGOTIABLE   INSTRUMENTS   LAW 


Me^,£^ri^^^r^ -(^/<?t^,^'i/<l^  /r 


^/y     -SJ^y^yy^Jfl^y  xg^^>^ 


^^<JXya^^1^.^^gfe^^^X^  ^j^t/f^^aAj 


(INDORSED) 

SAMUEL  STRASBURGER 

SARAH  STRASBURGER 

PATRICK  HONGLEY 

In  the  above  illustration  Strassenberger  &  Co.,  Inc.,  was  in  need  of 
funds  and  issued  its  note  to  the  Columbia  Bank.  The  bank  refused  to 
discount  it  without  the  individual  indorsement  of  the  officers,  which 
indorsement  was  made  on  the  note.  The  corporation  being  unable  to 
pay  the  note  in  full  the  Vice-President,  who  was  the  last  indorser,  paid 
the  same  and  brought  an  action  against  the  corporation  and  prior  in- 
dorsers.  There  was  no  evidence  of  any  express  agreement  between  the 
parties  with  respect  to  the  indorsement.  Held,  that  under  such  circimi- 
stances  the  presumption  arising  from  the  order  in  which  the  names  of  the 
indorsers  appear  was  officially  overcome  to  raise  a  question  of  fact  as  to 
whether  it  was  not  the  intention  of  the  parties  to  become  jointly  liable 
as  sureties  for  the  corporation,  and  not  liable  to  one  another  according  to 
the  order  of  their  respective  indorsements,  and  the  plaintiff  is  in  any  event 
entitled  to  contribution  from  the  Secretary  and  Treasurer  to  the  extent 
of  one-third  of  the  amount  she  was  obliged  to  pay. 

Strassenberger  v.  Strassenberger  &  Co.,  Inc.,  167  App.  Div.  198. 

§  119.  Liability  of  agent  or  broker.  Where  a  broker  or 
other  agent  negotiates  an  instrument  without  indorsement, 
he  incurs  all  the  liabilities  prescribed  by  section  one  hundred 
and  fifteen  of  this  chapter,  unless  he  discloses  the  name  of  his 
principal,  and  the  fact  that  he  is  acting  only  as  agent. 

Variant.— The  Illinois  statute  adds  the  following  subdivision: 
"Section  69a.     Whenever  any  bill  of  exchange  drawn  or  indorsed 
udthin  this  state  and  payable  without  the  state  is  duly  protested  for  non- 
acceptance  or  non-payment,  the  drawer  or  indorser  thereof,  due  notice 


LIABILITIES   OF   PAETIES  211 

being  given  of  such  non-acceptance  or  non-payment,  shall  pay  such  bill 
at  the  current  rate  of  exchange  and  with  legal  interest  from  the  time  such 
bill  ought  to  have  been  paid  imtil  paid,  together  with  the  costs  and  charges 
of  protest,  and  on  bills  payable  within  the  United  States  with  or  without 
suit,  five  per  cent,  damages  in  addition." 


See  Section  39. 

Effect  of  wording  of  a  letterhead  as  applying  to  section,  see  Meridan 
National  Bank  v.  Gallaudet,  120  N.  Y.  298. 


212  NEGOTIABLE    INSTRUMENTS    LAW 

« 

ARTICLE  8 
Presentment  for  Payment 

Section  130.  Effect  of  want  of  demand  on  principal  debtor. 

131.  Presentment  where  instrament  is  not  payable 

on  demand. 

132.  What  constitutes  a  sufficient  presentment. 

133.  Place  of  presentment. 

134.  Instrument  must  be  exhibited. 

135.  Presentment  where  instnmient  payable  at  bank. 

136.  Presentment  where  principal  debtor  is  dead. 

137.  Presentment  to  persons  liable  as  partners. 

138.  Presentment  to  joint  debtors. 

139.  When  presentment  not  required  to  charge  the 

drawer. 

140.  When  presentment  not  required  to  charge  the 

indorser. 

141.  When  delay  in  making  presentment  is  excused. 

142.  When  presentment  may  be  dispensed  with. 

143.  When  instrument  dishonored  by  non-payment. 

144.  Liability    of    person    secondarily    liable    when 

instnmient  dishonored. 

145.  Time  of  maturity. 

146.  Time;  how  computed. 

147.  Rule  where  instrument  payable  at  bank. 

148.  What  constitutes  payment  in  due  course. 

§  130.  Effect  of  want  of  demand  on  principal  debtor. 

Presentment  for  payment  is  not  necessary  in  order  to  charge 
the  person  primarily  liable  on  the  instrument;  but  if  the  in- 
strument is,  by  its  terms,  payable  at  a  special  place,  and  he 
is  able  and  willing  to  pay  it  there  at  maturity,  and  has  funds 
there  available  for  that  purpose,  such  ability  and  willingness 
are  equivalent  to  a  tender  of  payment  upon  his  part.  But 
except  as  herein  otherwise  provided,  presentment  for  payment 
is  necessary  in  order  to  charge  the  drawer  and  indorsers. 


PRESENTMENT   FOR   PAYMENT  213 

Variant. — The  Illinois  statute  has  added  after  the  word  "liable"  in 
the  first  clause  the  words  "except  in  case  of  bank  notes."  The  Wisconsin 
statute  omits  that  part  of  the  first  sentence  after  the  words  "on  the  instru- 
ment." The  words  "and  has  funds  here  available  for  that  purpose" 
appear  in  the  New  York,  Kansas  and  Ohio  statutes  but  are  omitted  In 
the  statutes  of  the  other  states. 


Neglect  to  present  the  check  does  not  affect  the  debt  for  which  it 
was  given. 

Greenwich  v.  Oregon  Imp.  Co.,  76  Hun.  194,  aff'd  148  N.  Y.  758. 

Practically  the  only  risk  assimied  by  the  holder  of  a  check  in  delaying 
presentment,  so  far  as  his  rights  against  the  drawer  are  concerned,  is  the 
insolvency  of  the  drawee. 

Springfield  and  Marine  Fire  Insurance  Co.  v.  Tincher,  30  111.  399; 
Binghamton  Pharmacy  v.  First  National  Bank  (Term.)  176  S.  W.  1038; 
Hibemia  National  Bank  v.  Lacombe,  84  N.  Y.  367;  Martin  v.  Home 
Bank,  160  N.  Y.  190. 

No  formal  presentation  and  demand  is  necessary  in  the  case  of  notes 
which  are  owned  by  the  bank  where  they  are  payable,  and  which  are  held 
by  it  ready  to  be  delivered  when  paid. 

Central  Bank  v.  Stoddard,  83  Conn.  332;  U.  S.  Bank  v.  Smith,  11 
Wheat.  171. 

No  presentment  at  the  place  named  is  necessary  to  give  a  right  of 
recovery  against  the  maker.  It  only  relieves  him  of  interest  and  costs 
if  he  was  ready  at  the  time  and  place  to  pay  it,  and  there  was  no  one  to 
receive  it.  Such  readiness  is  equivalent  to  a  tender,  and  an  answer  plead- 
ing that  fact,  and  payment  of  the  money  into  court,  will  be  a  bar  to  the 
recovery  of  interest  and  costs,  but  if  after  maturity  the  money  is  with- 
drawn and  not  brought  into  court  the  holder  is  then  entitled  to  a  judgment 
for  the  amount  thereof  with  interest  and  costs. 

Hills  V.  Place,  48  N.  Y.  520;  Van  Vliet  v.  Kanter,  139  App.  Div. 
(N.  Y.)  605;  Farmers  National  Bank  v.  Venner,  192  Mass.  534;  McKenney 
V.  Whipple,  21  Maine  98 ;  4  Am.  &  Eng.  Ency.  of  Law,  (2d  ed.)  373 ;  Dewers 
V.  Middle  States  Coal  Co.,  248  Pa.  202;  Bardsley  v.  Washington  Mills, 
54  Wash.  557;  Parker  v.  Stroud,  98  N.  Y.  379;  Ceney  v.  Libby,  134  U.  S. 
68;  Adams  v.  Hackensack,  44  N.  J.  L.  638. 

A  promissory  note  payable  on  demand  after  date  is  due  forthwith; 
and  as  between  the  maker  and  holder,  an  actual  demand  is  not  necessary. 

Hyman  v.  Doyle,  53  Misc.  597;  McMullen  v.  Rafferty,  89  N.  Y.  457; 
Church  V.  Stevens,  56  Misc.  573;  Cottle  v.  Marine  Bank,  166  N.  Y.  53,  59; 
Farmers'  National  Bank  v.  Venner,  192  Mass.  531,  78  N.  E.  540,  7  Ann. 
Cas.  690;  Florence  Oil,  etc.,  Co.  v.  First  National  Bank,  38  Colo.  119,  88 


214  NEGOTIABLE   INSTKUMENTS   LAW 

Pac.  182;  Citizens'  Savings  Bank  v.  Vaughan,  115  Mich.  156,  73  N.  W. 
143;  Dominion  Trust  Co.  v.  Hildner,  243  Pa.  253,  90  Atl.  69;  Dewees  v. 
Middle  States,  etc.,  Co.,  248  Pa.  202,  93  Atl.  958;  1  Daniel  Neg.  Inst.^' 
Section  643;  3  R.  C.  L.  1174-1175;  7  Cyc.  965. 

The  holder  of  a  bill  due  or  presentable  on  Saturday  may,  at  his  elec- 
tion, rest  upon  a  demand  and  presentment  made  before  noon  on  that  day,, 
and  if  he  does,  notice  of  demand  and  protest  given  on  that  day  or  the 
next  secular  day  is  good,  or  he  may  elect  to  make  a  demand  on  Monday 
and  if  payment  is  not  then  made,  in  order  to  hold  the  indorser  he  is  re- 
quired to  give  notice  of  dishonor  on  that  day. 

Sylvester  v.  Crohan,  138  N.  Y.  494. 

The  words  "on  demand"  in  a  note  do  not  make  the  demand  a  condition 
precedent  to  a  right  of  action,  but  import  that  the  debt  is  due  and  demand- 
able,  or  at  least  that  the  commencement  of  a  suit  therefor  is  a  sufficient 
demand. 

Dominion  Trust  Co.  v.  Hildner,  243  Pa.  253;  First  National  Bank  v. 
Story,  200  N.  Y.  350;  Field  v.  Sibley,  74  App.  Div.  81,  affirmed  without 
opinion  171  N.  Y.  514. 

Presentment  to  hold  the  drawer  or  indorser. — No  cause  of  action 
against  an  indorser  of  a  promissory  note  payable  on  demand  at  a  place 
specified,  until  demand  is  made  in  compliance  with  the  terms  of  the 
contract  and  due  notice  of  non-payment.  A  demand  by  letter  is  in- 
sufficient. 

Parker  v.  Stroud,  98  N.  Y.  379;  Pierce  v.  Whitney,  29  Me.  188; 
Dan.  Neg.  Int.  Sec.  518;  Hartford  Bank  v.  Green,  11  Iowa  476;  Gal- 
braith  v.  Shepard,  43  Wash.  698;  Carroll  v.  Sweet,  128  N.  Y.  19;  Filler  v. 
Gallantcheck,  66  N.  Y.  Supp.  509;  Moore  v.  Alexander,  63  App.  Div.  100; 
Hayward  v.  Empire  Sugar  Co.,  105  App.  Div.  21. 

The  fact  that  the  indorser  was  secured  by  a  mortgage  did  not  dispense 
with  the  necessity  of  presenting  the  note  for  payment  and  notice  of  non- 
payment. 

First  National  Bank  of  Binghamton  v.  Marlborough,  163  App. 
Div.  (N.  Y.)  72;  Seacord  v.  Miller,  13  N.  Y.  55. 

Presenting  a  check  for  certification  is  not  demanding  payment. 

Bradford  v.  Fox,  39  Barb.  203;  Simpson  v.  Mutual  Life  Ins.  Co.^ 
44  Cal.  139. 

In  Union  Bank  v.  SuUivan,  214  N.  Y.  333,  it  appeared  that  it  was  not 
intended  by  the  parties  to  the  note  that  the  maker  thereof  should  be 
primarily  liable  thereon  as  the  principal  debtor,  but  all  of  them,  makers 
and  indorsers  alike,  should  stand  behind  the  note  "not  separately  but 
collectively,"  it  was  held  that  it  was  not  necessary  in  order  to  charge  the 


PRESENTMENT   FOE   PAYMENT  215 

indorsers  that  the  note  be  presented  for  payment  at  any  particular  time 
or  place. 

See  also,  Witherow  v.  Slayback,  158  N.  Y.  649;  Haddock  v.  Haddock, 
192  N.  Y.  499. 

The  plaintiffs,  indorsers  of  a  note,  and  chargeable  with  knowledge 
of  the  residence  of  a  prior  indorser,  gave  erroneous  information  to  the 
holder,  a  bank,  to  which  they  had  indorsed  it,  whereby  the  prior  indorser 
failed  to  receive  notice  of  non-payment.  Then  they  took  up  the  note 
and  brought  their  action  against  the  prior  indorser  without  further  notice. 
Held,  that  though  the  bank  might  have  recovered,  the  plaintiffs  could 
not  and  that  as  against  them  was  discharged. 

Beale  v.  Parrish,  20  N.  Y.  408. 

A  bank  on  crediting  to  a  depositor  the  check  of  a  third  party  drawn 
on  another  bank  and  indorsed  by  the  depositor,  assumes  the  obligation 
to  present  it  for  payment  within  a  reasonable  time,  and  if  it  omits  to  do 
so,  and  the  check  is  dishonored  through  the  failure  of  the  bank  on  which 
it  is  drawn,  both  the  indorser  and  drawer  are  discharged,  and  if  the  de- 
positor, in  ignorance  of  the  facts,  pays  the  amount  of  the  check  to  his 
bank  imder  his  supposed  liability  as  indorser,  he  has  a  good  cause  of 
action  against  the  bank  for  the  recovery  of  the  money  so  paid  by  mistake. 

Martin  v.  Home  Bank,  160  N.  Y.  190;  Carroll  v.  Sweet,  128  N.  Y.  19; 
Dan.  Neg.  Int.  Sec.  1592;  Talbot  v.  National  Bank,  129  Mass.  67;  Williams 
V.  Brown,  53  App.  Div.  (N.  Y.)  486. 

The  president  and  treasurer  of  a  corporation,  who  indorses  the  note, 
is  entitled  to  presentment  and  notice  of  non-payment  in  order  to  fix  his 
liability,  even  though  he  knew  of  the  insolvency. 

Grandison  v.  Robertson,  231  Fed.  786. 

The  insolvency  of  the  maker  of  a  promissory  note  is  not  a  sufficient 
excuse  for  failure  to  seasonably  present  the  note  in  order  to  charge  an 
indorser. 

O'Neill  V.  Meighan,  32  Misc.  516. 

Burden  of  proof. — The  burden  is  on  the  holder  of  a  note  when  seeking 
to  hold  an  indorser,  to  prove  due  and  timely  presentment  and  the  giving 
of  notice  of  its  dishonor.  The  obligation  of  the  indorser  is  conditional 
upon  all  the  steps  having  been  taken  by  the  holder  which  the  statute  has 
presented  as  to  presentment,  etc. 

Commercial  National  Bank  v.  Zimmerman,  185  N.  Y.  218. 

In  an  action  on  a  note  payable  at  a  specified  place  demand  need 
not  be  averred  or  proved,  and  if  the  maker  was  ready  and  offered  at  the 
time  and  place  to  pay  it,  this  is  a  matter  of  defense  to  be  pleaded  and 
proved  by  him. 

Florence  Oil  Co,  v.  Bank  of  Canon  City,  38  Colo.  120. 


216  NEGOTIABLE   INSTRUMENTS   LAW 

Presentment  and  demand  of  payment  must  be  alleged  in  the  com- 
plaint in  an  action  against  an  indorser. 

Jaffray  v.  Krauss,  79  Hun.  449. 

Where  a  note  is  made  payable  "on  demand  and  upon  the  return 
of  security  given"  the  making  of  a  demand  accompanied  by  a  tender 
of  the  securities  is  not  a  condition  precedent  to  the  maintenance  of  an 
action  to  recover  upon  the  note ;  it  is  sufficient  for  the  plaintiff  to  produce 
and  tender  the  note  and  securities  upon  the  trial. 

Spencer  v.  Drake,  84  App.  Div.  (N.  Y.)  272. 

Cases  on  the  subject  generally,  see,  Merritt  v.  Todd,  23  N.  Y.  28; 
Pardee  v.  Fish,  60  N.  Y.  268;  O'Neill  v.  Meighan,  32  Misc.  516;  Williams  v. 
Brown,  53  App.  Div.  (N.  Y.)  486;  Martin  v.  Home  Bank,  160  N.  Y.  190; 
National  Bank  v.  Mackey,  157  111.  App.  409;  Hough  v.  Gearen,  110  la. 
240;  Union  Bank  v.  Sullivan,  214  N.  Y.  312;  Start  v.  Tupper,  (Vt.)  69 
Atl.  Rep.  151;  see  also  notes  to  Section  26. 

§  131.  Presentment  where  instrument  is  not  payable  on 
demand.  Where  the  instniment  is  not  payable  on  demand, 
presentment  must  be  made  on  the  day  it  falls  due.  Where 
it  is  payable  on  demand,  presentment  must  be  made  within  a 
reasonable  time  after  its  issue,  except  that  in  the  case  of  a  bill 
of  exchange,  presentment  for  payment  will  be  sufficient  if 
made  within  a  reasonable  time  after  the  last  negotiation 
thereof. 

Variant. — The  Nebraska  statute  omits  all  of  the  last  sentence  after 
the  word  "issue."  The  Vermont  statute  the  words  "its  issue  in  order  to 
charge  the  drawer"  are  substituted  for  "the  last  negotiation  thereof." 


This  section  changes  the  law  as  interpreted  in  most  of  the  states 
prior  to  its  adoption,  the  courts  having  held  that  a  note  payable  on  demand 
was  a  continuing  security  on  which  the  indorsers  continued  liable  until  an 
actual  demand  was  made  and  the  holder  was  not  chargeable  with,  by 
reason  of  his  failure  to  make  a  demand  within  a  reasonable  time. 

Merrett  v.  Todd,  23  N.  Y.  28;  Isenlord  v.  Dillenbeck,  79  N.  Y.  617; 
Syracuse,  etc.  R.  R.  Co.  v.  Collins,  57  N.  Y.  651;  Dimley  v.  McCullagh, 
92  Hun.  454;  Donlon  v.  Davidson,  7  App.  Div.  (N.  Y.)  461;  Crim  v. 
Starkweather,  88  N.  Y.  339;  Buckhalter  v.  Second  National  Bank,  42 
N.  Y.  538;  Darnell  v.  Moorehouse,  45  N.  Y.  64;  Smith  v.  MiUer,  43  N.  Y. 
171;  First  National  Bank  v.  Fourth  National  Bank,  77  N.  Y.  320. 

An  informal  request  for  the  payment  of  a  demand  note,  not  accom- 
panied by  a  presentment  of  it  and  not  intended  as  a  formal  presentment 


PRESENTMENT   FOR   PAYMENT 


217 


and  demand,  is  not  sufficient  to  put  the  note  in  dishonor  so  as  to  charge 
the  indorser. 

N.  Y.  National  Bank  v.  Kennedy,  145  App.  Div.  669. 

The  officers  of  a  corporation  who  indorse  in  their  individual  capacity 
the  note  of  their  corporation,  are  indorsers  entitled  to  presentment  of  the 
note  for  payment  and  note  of  non-payment. 

Grandison  v.  Robertson,  231  Fed.  785. 

What  is  reasonable  time. — The  intent  of  the  section  was  to  abrogate 
the  former  distinction  between  notes  or  bills,  payable  on  demand  and 
bearing  interest,  and  those  payable  on  demand  merely.  "In  determining 
what  is  reasonable  time,  or  unreasonable  time,  regard  is  to  be  had  to  the 
nature  of  the  instrument,  the  usage  of  trade  or  business  with  respect  to 
such  instnmients  and  the  facts  of  the  particular  case,"  Sec.  4.  The 
question  whether  a  note  or  bill  was  presented  within  "a  reasonable  time" 
after  its  issue  is,  where  the  facts  are  ascertained  and  not  in  dispute,  a 
question  of  law  for  the  coiirt,  although  the  question,  if  the  facts  are  im- 
settled,  and  the  testimony  conflicting,  might  be  a  mixed  one  of  law  and 
fact,  which  the  jury  should  decide  imder  the  instructions  of  the  court 
as  to  the  law. 

Commercial  National  Bank  v.  Zimmerman,  185  N.  Y.  211. 

The  case  of  German-American  Bank  v.  Mills,  99  App.  Div.  314, 
which  held  the  section  is  in  effect  a  statute  of  limitations,  and  that  the 
burden  was  upon  the  indorser  of  a  demand  note  to  plead  and  prove  that 
presentment  was  delayed  an  imreasonable  time,  must  be  considered  as 
overruled  by 

Commercial  National  Bank  v.  Zimmerman,  supra. 

What  is  "reasonable  time"  cannot  always  be  measured  by  months. 
The  authorities  hold  that  as  short  a  period  as  three  months  and  as  long 
a  one  as  twenty-one  months,  has  been  held  to  be  within  a  reasonable 
time,  depending  upon  the  special  facts  in  each  case. 

German-American  Bank  v.  Atwater,  165  N.  Y.  36;  Schlesinger  v. 
Schultz,  110  App.  Div.  (N.  Y.)  356;  Citizens  Bank  v.  National  Bank, 
135  la.  611;  Becker  v.  Horwitz,  114  N.  Y.  Supp.  161. 

In  Columbia  Banking  Co.  v.  Bowen,  134  Wis.  223,  the  court  said; 
"From  the  foregoing  it  seems  plain  that  as  regards  the  payee  who  puts 
the  same  in  circulation  with  his  unqualified  indorsement  thereon,  and  all 
subsequent  parties  thereto  so  indorsing  the  same,  presentment  for  payment 
is  sufficient,  as  regards  their  liability,  if  made  within  a  reasonable  time 
after  the  last  negotiation.  A  bill  of  exchange,  payable  on  demand, 
regardless  of  its  character,  put  in  circulation,  so  long  as  its  circulating 
character  is  presumed  may  be  outstanding  without  impairing  the  liability 
of  the  indorsers  thereof.     Formerly  the  length  of  time  within  which  a 


2]8  NEGOTIABLE   INSTRUMENTS    LAW 

bill  of  exchange  might  circulate  without  impairing  such  liability  was 
more  or  less  imcertain,  rendering  it  very  difficult  to  determine  any  one 
case  by  the  decision  of  another." 

One  of  the  niles  which  has  been  established  is,  that  where  the  drawer 
and  drawee  and  the  payee  are  in  the  same  city  or  town,  a  check  to  be 
presented  within  a  reasonable  time,  should  be  presented  at  some  time 
before  the  close  of  banking  hours  on  the  day  after  it  is  issued,  and  that  its 
circulation  from  hand  to  hand  will  not  extend  the  time  of  presentment 
to  the  detriment  of  the  drawer.  If  it  is  presented  and  paid  afterwards  the 
drawer  suffers  no  harm.  But  if  not  presented  within  the  time  thus  fixed, 
and  there  is  a  loss,  it  falls  not  on  him  but  on  the  holder. 

Gordon  v.  Levine,  194  Mass.  421;  Natt  v.  Gans,  114  Ala.  264;  Simp- 
son V.  Pacific  Ins.  Co.,  44  Cal.  139;  Bickford  v.  National  Bank  of  Chicago, 
42  111.  238;  Northwestern  Coal  Co.  v.  Bowman,  69  la.  150;  Grange  v. 
Reigh,  93  Wis.  552;  Woodruff  v.  Plant,  41  Conn.  344;  Carroll  v.  Sweet, 
128  N.  Y.  19;  Kirkpatrick  v.  Puryear,  93  Tenn.  409;  Parker  v.  Reddick, 
65  Miss.  242,  246. 

A  delay  of  two  years  before  presenting  a  demand  note  for  payment 
would  ordinarily  be  unreasonable. 

Hussey  v.  Sutton,  96  Misc.  552. 

Many  of  the  difficulties  on  the  question  of  the  time  for  presentment 
have  arisen  from  anxiety  on  the  part  of  the  courts  to  adopt,  in  commercial 
cases,  so  far  as  practicable,  fixed  and  certain  rules  as  to  what  shall  be 
considered  reasonable  diligence,  so  that  the  holders  of  commercial  paper, 
and  those  who  are  contingently  responsible  for  its  payment,  may  be  able 
to  understand  their  several  rights  and  duties  in  each  particular  case  which 
may  arise.  For  this  purpose  they  have  endeavored  to  settle,  as  a  question 
of  law,  what,  from  its  very  nature,  must  in  most  cases  be  a  mere  question 
of  fact.  Without  doubt  each  successive  holder  should  either  negotiate 
the  instrument  according  to  the  usual  course  of  business,  or  should  cause 
it  to  be  presented  for  acceptance  and  payment,  and  if  he  does  neither  the 
one  nor  the  other,  but  locks  it  up  for  an  unreasonable  length  of  time,  he 
shoiild  be  deemed  guilty  of  laches,  discharging  those  who  are  contingently 
liable  to  him  as  drawers  or  indorsers.  Nor  may  the  tiltimate  presentment 
for  payment  be  delayed  beyond  a  reasonable  time  by  successive  transfers, 
any  more  than  it  may  by  being  locked  up  or  held  an  tmreasonable  time 
by  the  first  or  any  successive  holder.  But  if  the  instrument  is  kept  in 
circulation,  and  not  held  an  unreasonable  time  by  any  one  holder,  through 
whose  hands  it  passes,  it  is  difficult  to  assign  any  particular  time  in  which 
it  ought  to  be  presented  to  the  maker.  Indeed  it  cannot  be  said  that  any 
particular  time  is  reasonable  or  imreasonable  in  all  cases,  regardless  of 
the  usages  of  business,  and  the  facts  of  the  particular  case.     The  object 


PRESENTMENT   FOR   PAYMENT  219 

in  all  cases  is  to  require  reasonable  diligence  on  the  part  of  the  holder, 
and  such  diligence  must  be  measured  by  the  general  convenience  of  the 
commercial  world,  and  the  practicability  to  accomplish  the  end  required 
by  ordinary  skill,  caution  and  effort.  The  question  depends  upon  the 
particular  facts  and  circumstances  surroimding  the  parties,  and  all  these 
matters  should  be  considered  in  arriving  at  a  solution  of  the  question. 

3  R.  C.  L.  1193;  Mohawk  Bank  v.  Broderich,  13  Wend.  (N.  Y.)  133; 
27  Am.  Dec.  192;  Parker  v.  Reddick,  65  Miss.  242,  3  S.  Rep.  575;  Pardee  v. 
Fish,  60  N.  Y.  265;  Walch  v.  Dart,  23  Wis.  334;  Merritt  v.  Todd,  23  N.  Y. 
28;  State  Bank  v.  Weiss,  46  Misc.  93;  Schlessinger  v.  Schultz,  110  App. 
Div.  356;  Sulzberger  v.  Cramer,  170  App.  Div.  114;  see  also,  Frazer  v. 
Phoenix  National  Bank,  161  Ky.  175;  Merritt  v.  Jackson,  181  Mass.  69; 
Manufacturing  Co.  v.  Summers,  143  N.  C.  103;  Anderson  v.  Bank,  144 
la.  255;  Anderson  v.  Gill,  79  Md.  312;  Beauregard  v.  Knowlton,  156 
Mass.  395;  Shutts  v.  Fingar,  100  N.  Y.  539;  Schlessinger  v.  Shultz,  110 
App.  Div.  (N.  Y.)  356;  Section  4  and  notes. 

Burden  of  proof. — The  btirden  is  on  the  holder  of  a  note,  when  seeking 
to  hold  an  indorser,  to  prove  due  and  timely  presentment. 

Commercial  National  Bank  v.  Zimmerman,  185  N.  Y.  218;  Merrett  v. 
Jackson,  181  Mass.  71;  Keyes  v.  Fenstermaker,  24  Col.  329;  Bank  v. 
Burgwyn,  108  N.  C.  62;  Savings  Bank  v.  Moodie,  135  la.  693. 

Rule  as  to  lost  check. — It  is  the  duty  of  the  owner  of  a  lost  check, 
for  the  purpose  of  immediate  presentment,  to  at  once  make  substituted 
presentment  and  demand  by  means  of  a  copy  or  sufhcient  description  of 
the  check,  and  in  case  of  non-payment  to  give  notice  to  the  indorser. 

Aebi  V.  Bank  of  Evansville,  124  Wis.  78;  1  Parsons  Notes  and  Bills, 
368,  448,  530;  Hinsdale  v.  Miles,  5  Conn.  331. 

Pleading. — In  an  action  on  a  promissory  note,  an  allegation  that  due 
notice  of  protest  was  duly  given,  is  equivalent  to  an  allegation  that  notice 
of  presentment,  demand,  non-payment  and  protest  was  given.  The  term 
"protest"  includes,  in  a  popular  sense,  all  the  steps  taken  to  fix  the  lia- 
bility of  an  indorser  upon  the  dishonor  of  commercial  paper  to  which  he 
is  a  party. 

Sherman  v.  Ecker,  59  Misc.  217;  2  Dan.  Neg.  Inst.  (5th  ed.)  Sec.  921. 

§  132.  What  constitutes  a  sufficient  presentment.    Pre- 
sentment for  payment,  to  be  sufificient,  must  be  made: 

1.  By  the  holder,  or  by  some  person  authorized  to  receive 
payment  on  his  behalf; 

2.  At  a  reasonable  hour  on  a  business  day; 


220  NEGOTIABLE   INSTRUMENTS    LAW 

3.  At  a  proper  place  as  herein  defined; 

4.  To  the  person  primarily  liable  on  the  instrument,  or  if 
he  is  absent  or  inaccessible,  to  any  person  found  at  the  place 
where  the  presentment  is  made. 

Subd.  I. — It  is  essential  to  the  validity  of  a  demand,  that  it  shall 
be  made  by  a  person  authorized  to  receive  payment  and  deliver  the 
instrument  upon  which  it  is  founded,  and  the  person  upon  whom  it  is 
made  must  then  be  afforded  an  opporttmit}'',  by  immediate  payment  to 
performance,  to  protect  himself  from  the  consequence  of  a  breach  of 
contract. 

Parker  v.  Stroud,  98  N.  Y.  384;  Fowler  Paper  Co.  v.  Jones,  183 
111.  311. 

The  possession  by  an  assumed  agent  of  a  promissory  note  payable 
to  the  order  of  the  payee,  and  not  indorsed  by  him,  is  not  alone  suJBficient 
evidence  of  his  authority  to  authorize  a  payment  thereof  to  him. 

Doubleday  v.  Kress,  50  N.  Y.  410. 

Subd.  2. — The  defendant  agreed  to  pay  at  a  place  stated  and  at  a 
time  stated,  and,  as  he  was  to  pay  at  a  bank,  so  the  time  was  necessarily 
limited  to  the  hours  within  which  the  bank  in  the  due  course  of  its  usual 
business  was  open  to  receive  payment. 

Osbom  V.  Rogers,  112  N.  Y.  577. 

A  note,  payable  at  a  bank  where  the  maker  had  no  ftmds,  was  de- 
livered after  business  on  the  date  it  became  due  to  the  teller,  who  was 
also  a  notary,  at  his  dwelling,  for  the  purpose  of  demanding  payment. 
He  went  to  the  bank,  and  being  unable  to  obtain  entrance,  demanded 
payment  of  himself  at  the  bank  door.  Held,  sufficient  presentment  to 
charge  the  indorser. 

Bank  of  Syracuse  v.  Hollister,  17  N.  Y.  46. 

A  presentment  at  a  banker's  out  of  the  usual  hours  will  be  unob- 
jectionable if  the  banker,  or  any  agent  on  his  behalf,  were  there  at  the 
time  of  presentment. 

Bayl  on  Bills,  212;  Chit,  on  Bills,  278;  Salt  Springs  Bank  v.  Burton, 
57  N.  Y.  430;  Flint  v.  Rogers,  15  Me.  67;  Waring  v.  Betts,  90  Va.  46. 

The  maker  of  a  promissory  note  has  until  the  close  of  the  banking 
hours,  of  the  bank  where  the  note  is  payable,  in  which  to  pay  it,  and  if 
before  the  close  of  such  hoiu^s  he  deposits  the  money  in  the  bank,  demands 
of  payment  earlier  on  the  same  day  are  premature,  and  the  maker  is  not 
liable  for  protest  fees  and  interest  after  maturity  where  his  account  was 
kept  good  until  action  brought  and  he  thereafter  immediately  paid  the 
amotmt  due  into  court  and  pleaded  tender,  nor  is  he  chargeable  with 
costs  of  the  action. 


PRESENTMENT    FOR    PAYMENT  221 

German  Am.  Bank  v.  Milliman,  31  Misc.  87;  Tiedman  on  Bills  and 
Notes,  Sec.  121;  Planters  Bank  v.  Markham,  6  Miss.  397. 

An  averment  that  the  note  was  presented  at  the  maker's  place  of 
business  and  that  "payment  was  then  and  there  duly  demanded"  and 
refused,  held  equivalent  to  an  averment  that  the  note  was  presented 
within  usual  business  hours. 

Wallace  v.  Crilley,  46  Wis.  577;  see  also,  Schlessinger  v.  Schultz, 
110  App.  Div.  (N.  Y.)  356. 

Subd.  3. — Presentment  is  made  at  a  proper  place  where  a  place  of 
payment  is  specified  in  the  instnmient  and  it  is  there  presented. 

Section  133.     Hutchinson  v.  Crutcher,  98  Tenn.  421. 

A  demand  of  payment,  at  a  place  named,  is  an  essential  part  of  the 
contract  so  far  as  the  indorser  is  concerned,  and  no  right  of  action  accrues 
to  the  holder  until  after  demand  has  been  made  in  strict  compliance  with 
the  terms  of  the  contract  and  due  notice  given  of  the  default. 

Parker  v.  Stroud,  98  N.  Y.  379. 

The  addition  to  a  promissory  note  payable  generally  of  words  specify- 
ing a  particular  place  of  payment  is  a  material  alteration  of  a  contract 
which  of  itself  discharges  the  indorser. 

Woodworth  v.  President  Bank  of  America,  19  Johns,  391. 

A  demand  at  the  place  of  business  designated  by  the  maker,  of  a 
person  who  represents  himself  to  be  the  maker  is  prima  facie  sufficient. 

Hunt  V.  Maybee,  7  N.  Y.  266. 

Where  a  note  is  dated  at  a  certain  place  and  is  made  payable  at  the 
First  National  Bank,  presentment  should  be  made  at  the  First  National 
Bank  at  that  place. 

Finch  V.  Calkins,  183  Mich.  298;  149  N.  M.  1037;  Bailey  v.  Birkhofer, 
123  Iowa  59;  see  also  notes  under  Section  133. 

Subd.  4. — A  demand  made  over  the  telephone  on  the  maker  is  not 
sufficient.  Presentment  of  the  note  and  demand  must  be  made  by  actual 
exhibition  of  the  note.  While  it  may  not  be  necessary  to  actually  produce 
the  note  if  the  maker  refuses  to  pay  it,  it  must  be  there  at  the  place  for 
presentment,  otherwise  the  presentment  is  insufficient. 

Gilpin  v.  Savage,  201  N.  Y.  167,  reversing  132  App.  Div.  948. 

Evidence  to  prove  "absent  or  inaccessible"  see.  In  re.  Poole,  116 
N.  E.  (Mass.)  229;  Haney  v.  Donnelly,  12  Gray  361. 

§  133.  Place  of  presentment.  Presentment  for  pay- 
ment is  made  at  the  proper  place : 

I .  Where  a  place  of  payment  is  specified  in  the  instrument 
and  it  is  there  presented; 


222  NEGOTIABLE    INSTRUMENTS   LAW 

2.  Where  no  place  of  payment  is  specified,  but  the  address 
of  the  person  to  make  payment  is  given  in  the  instrument  and 
it  is  there  presented; 

3.  Where  no  place  of  payment  is  specified  and  no  address 
is  given  and  the  instrument  is  presented  at  the  usual  place  of 
business  or  residence  of  the  person  to  make  payment; 

4.  In  any  other  case  if  presented  to  the  person  to  make 
payment  wherever  he  can  be  found,  or  if  presented  at  his 
last  known  place  of  business  or  residence. 

Subd.  I. — ^Where  a  note  is  made  payable  at  a  branch  office  of  a  trust 
company,  presentment  at  the  central  office  is  not  sufficient  to  charge  the 
indorser. 

Iron  Clad  Manufacturing  Co.  v.  Sackin,  129  App.  Div.  (N.  Y.)  555; 
Brooks  V.  Higby,  11  Hun.  235. 

Schlesinger  v.  Schultz,  110  App.  Div.  358;  Baer  v.  Hoffman,  150 
App.  Div.  474;  see  notes  imder  Section  132,  Subd.  3. 

A  demand  of  payment,  at  the  place  named,  is  an  essential  part  of 
the  contract  so  far  as  the  indorser  is  concerned,  and  no  right  of  action 
accrues  to  the  holder  imtil  after  demand  has  been  made  in  strict  com- 
pliance with  the  terms  of  the  contract. 

Parker  v.  Stroud,  98  N.  Y.  379;  Gilpin  v.  Savage,  201  N.  Y.  170; 
Smith  v.  Poillon,  87  N.  Y.  594;  Adams  v.  Leland,  30  N.  Y.  309. 

It  is  competent  for  all  parties  to  a  note  to  agree  orally,  that  the  note 
shall  be  payable  at  a  particular  place,  so  far  as  to  make  a  demand  of 
payment  there  sufficient  to  bind  the  indorser. 

Meyer  v.  Hibsher,  47  N.  Y.  265. 

Presentment  through  the  clearing  house  is  sufficient. 

Columbia  Knickerbocker  Trust  Co.  v.  Miller,  215  N.  Y.  197. 

Presentment  at  the  "place  of  payment"  means  presentment  at  the 
place  named,  not  merely  presentment  to  the  individual,  corporation  or 
institution. 

Iron  Clad  Mfg.  Co.  v.  Sankin,  129  App.  Div.  (N.  Y.)  555. 

Subd.  2. — ^Where  nothing  appears  to  the  contrary,  a  note  is  presumed 
to  have  been  made  at  the  place  where  it  bears  date,  consequently  a  note 
dated  "Homell,  N.  Y.,"  and  payable  at  "The  First  National  Bank," 
may  be  presented  for  payment  at  the  First  National  Bank  of  Homell, 
New  York. 

Finch  V.  Calkins,  149  N.  W.  1037;  183  Mich.  300;  Baily  v.  Birkhofer, 
123  Iowa,  59;  Hazard  v.  Spencer,  17  R.  I.  561. 


PKESENTMENT    FOR    PAYMENT  223 

Although  the  date  of  a  note  does  not  make  it  payable  at  that  place, 
still  the  date  may,  in  one  respect,  be  very  important.  It  raises  a  pre- 
sumption that  the  maker  resides  there,  although  it  is  only  a  presimiption. 

3  Kent,  96,  97;  Lowery  v.  Scott,  24  Wend.  (N.  Y.)  358,  35  Am.  Dec. 
627;  Galpin  v.  Hard,  3  McCord  (S.  C.)  394,  15  Am.  Dec.  640. 

Where  no  place  of  payment  is  named  in  a  promissory  note,  demand 
at  the  usual  place  of  business  of  the  maker,  though  he  be  absent  is  suffi- 
cient, or  at  his  residence;  or  to  him  in  person. 

Holtz  V.  Boppe,  37  N.  Y.  634;  Baumgartner  v.  Reeves,  35  Pa.  St. 
251 ;  Sulzberger  v.  Bank,  86  Tenn.  201 ;  Oxnard  v.  Vamum,  111  Pa.  St.  193. 

Subd.  3. — The  rule  requiring  a  demand  of  payment  to  be  made 
personally  upon  the  maker  at  his  residence  or  place  of  business,  is  satisfied 
if  due  and  reasonable  diligence  is  used  to  ascertain  such  residence  or  place 
of  business,  without  success;  and  the  note  may  then  be  protested  for  non- 
payment so  as  to  charge  indorsers. 

Holtz  V.  Boppe,  37  N.  Y.  634. 

The  holders  of  a  note  which,  under  this  Sub-division  might  properly 
be  presented  at  the  usual  place  of  business  or  residence  of  the  maker,  went 
to  the  maker's  residence,  and,  finding  the  doors  locked,  went  around  a 
comer  of  the  house,  where  they  saw  a  man  standing  in  a  stable  door  about 
400  feet  away;  an  open  field  lying  between.  They  and  the  man  walked 
towards  each  other  and  met  in  the  field,  where  demand  for  payment  was 
made  on  him.  There  was  nothing  to  show  that  the  stable  or  the  field 
belonged  to  the  maker,  or  was  used  in  connection  with  her  residence.  Her 
place  of  business  across  the  street  was  not  visited  for  the  purpose  of  making 
demand.  Held,  that  the  facts  did  not  show  due  diligence  in  making  a 
demand. 

In  re  Poole,  116  N.  E.  (Mass.)  227;  Demond  v.  Bumham,  133  Mass. 
339;  Adams  v.  Wright,  14  Wis.  408. 

When  a  promissory  note  is  not  made  payable  at  any  particular  place, 
and  if  the  maker  has  no  known  residence  or  place  of  btisiness,  and  on 
inquiry  at  his  former  place  of  business  the  holder  was  referred  to  the 
agent  of  the  maker,  who  informed  him  they  were  "out  west."  Held,  that 
this  was  equivalent  to  saying  they  were  out  of  the  state;  and  that  due 
diligence  had  been  used  by  the  holder  to  ascertain  where  to  demand 
payment. 

Adams  v.  Leland,  30  N.  Y.  309;  Foster  v.  Julien,  24  N.  Y.  28. 

The  holder  of  a  note  is  bound  to  make  use  of  all  reasonable  and 
proper  diligence  to  find  the  maker,  and  demand  payment  where  no  par- 
ticular place  is  appointed  for  such  payment. 


224  NEGOTIABLE    INSTRUMENTS    LAW 

Talbot  V.  National  Bank  of  Commonwealth,  129  Mass.  67;  Sulz- 
bacher  v.  Bank,  86  Tenn.  201;  6  S.  W.  129;  Oxnard  v.  Vamum,  111  Pa. 
St.  193. 

See  also,  Baily  v.  Birkhofer,  123  la.  59;  Strawberry  Point  Bank  v. 
Lee,  117  Mich.  122;  Cox  v.  National  Bank,  100  U.  S.  704;  Clark  v.  Sar- 
gent, 111  Pa.  St.  175. 

Subd.  4. — Where  a  note  is  made  payable  at  a  certain  locality,  without 
designation  of  a  particular  place  therein,  if  the  maker  has  no  place  of 
business  or  residence  in  the  place  where  it  is  generally  made  payable,  if 
the  holder  of  the  note  is  within  such  locality,  on  the  day  of  payment 
with  the  note  ready  to  receive  payment,  that  is  sufficient  to  constitute  a 
presentment  and  demand. 

Meyer  v.  Hibsher,  47  N.  Y.  265;  Parker  v.  Kellogg,  158  Mass.  90. 

Where  at  the  time  of  the  maturity  of  a  promissory  note  given  by  a 
co-partnership,  in  which  no  place  of  payment  is  named,  the  firm  has  been 
dissolved  by  its  bankruptcy,  a  demand  of  one  of  the  former  co-partners 
in  person  is  sufficient  to  charge  an  indorser. 

Gates  V.  Beecher,  60  N.  Y.  518. 

§  134.  Instrument  must  be  exhibited.  The  instrument 
must  be  exhibited  to  the  person  from  whom  payment  is  de- 
manded, and  when  it  is  paid  must  be  delivered  up  to  the  party- 
paying  it. 

Where  notes,  when  due,  were  not  at  the  place  provided  for  payment, 
but  were  in  a  bank,  and  so  were  not  only  not  in  readiness  for  exhibition 
and  surrender,  but  could  not  have  been  siurendered  if  payment  had  been 
offered  at  the  due  dates,  there  was  no  legal  presentment  for  payment  at 
the  time  and  place  specified  in  the  notes;  and,  no  waiver  being  pleaded 
or  claimed,  the  indorser  could  not  be  held. 

Greco  v.  Lo  Monte,  162  N.  Y.  Supp.  982. 

The  acceptor  has  a  right  to  see  the  bill  before  he  determines  whether 
he  will  pay  or  not.  If  he  pays  it  he  has  the  right  to  have  it  delivered  to 
him  for  use  as  a  voucher  in  his  settlement  with  the  drawer. 

Vergennes  v.  Cameron,  7  Barb.  143. 

"To  render  a  presentment  for  pajnnent  sufficient,  the  instnmient 
must  be  exhibited  to  the  person  from  whom  payment  is  demanded.  This 
rule  has  been  stated  as  follows:  'No  valid  presentment  and  demand  can 
be  made  by  any  person  without  having  the  note  in  his  possession  at  the 
time,  so  that  the  maker  may  receive  it  in  case  he  pays  the  amount  due, 
unless  special  circumstances,  such  as  the  loss  of  the  note  or  its  destruction, 
are  shown  to  excuse  its  absence.'    The  right  of  such  person  to  an  actual 


PRESENTMENT   FOR   PAYMENT  225 

exhibition  or  production  of  the  instrument  may  be  waived  by  failing  to 
ask  for  it,  and  refusing  payment  on  other  grounds." 

Selover,  Neg.  Ins.  (2d  Ed.)  Sec.  193.  In  support  of  the  last  sen- 
tence, see,  Legg  v.  Vinal,  165  Mass.  555,  43  N.  E.  518;  Waring  v.  Betts, 
90  Va.  46,  17  S.  E.  739,  44  Am.  St.  Rep.  890;  King  v.  Crowell,  61  Me. 
244,  14  Am.  Rep.  560;  Lockwood  v.  Crawford,  18  Conn.  361;  Gilpin  v. 
Savage,  60  Misc.  Rep.  605,  112  N.  Y.  Supp.  802;  Hodges  v.  Blaylock, 
161  Pac.  (Or.)  396. 

Presentment  of  a  note  and  demand  of  payment  must  be  made  by 
actual  exhibition  of  the  instrument  itself  or,  at  least,  the  demand  should 
be  accompanied  by  some  clear  indication  that  the  instrument  is  at  hand 
ready  to  be  delivered,  and  such  must  really  be  the  case.  While  it  may  not 
be  necessary  to  actually  produce  the  note  if  the  makers  refuse  to  pay  it, 
it  must  be  at  the  place  of  presentment,  otherwise  the  presentment  is  in- 
sufficient. Hence  a  demand  over  the  telephone  on  the  maker,  at  the 
place  specified  in  the  note  is  not  sufficient. 

Gilpin  V.  Savage,  201  N.  Y.  167;  34  L.  R.  A.  417;  Legg  v.  Viman, 
165  Mass.  555;  Waring  v.  Betts,  90  Va.  46. 

Where  the  holder  of  notes  did  not  have  them  with  him  at  the  time  he 
demanded  payment  and  therefore  was  not  in  a  position  to  exhibit  them 
if  called  on  to  do  so,  or  to  surrender  them  in  case  of  payment,  the  demand 
was  held  insufficient  to  charge  an  indorser  with  liability. 

Greco  v.  Lo  Monte,  162  N.  Y.  Supp.  982. 

An  informal  request  for  the  pa)mient  of  a  demand  note,  not  accom- 
panied by  a  presentment  of  it  and  not  intended  as  a  formal  presentment 
and  demand,  is  not  sufficient  to  put  the  note  in  dishonor  so  as  to  charge 
an  indorser.  Such  informal  demand,  however,  may  have  an  important 
bearing  on  the  question  as  to  whether  the  note  was  actually  presented 
for  payment  within  a  reasonable  time. 

State  of  N.  Y.  National  Bank  v.  Kennedy,  145  App.  Div.  669;  Con- 
gress Brewing  Co.  v.  Hobenicht,  83  App.  Div.  (N.  Y.)  141. 

Demand  by  telephone. — A  demand  by  telephone  on  the  maker  of 
a  promissory  note  is  not  siifficient  presentment  to  charge  the  indorser, 
even  though  the  person  making  the  demand  has  the  note  in  his  possession 
at  the  time  of  such  demand. 

Gilpin  V.  Savage,  201  N.  Y.  167;  reversing  132  App.  Div.  948;  National 
Bank  v.  Kennedy,  145  App.  Div.  669;  Parker  v.  Stroud,  98  N.  Y.  379. 

Security  to  be  tendered. — A  demand  on  the  maker  of  a  secured  note 
without  offering  to  return  his  collateral,  is  insufficient  to  charge  an  indorser 
with  liability. 

Ocean  National  Bank  v.  Fant,  50  N.  Y.  474. 


226  NEGOTIABLE   INSTRUMENTS   LAW 

§  i35«  Presentment  where  instrument  payable  at  bank. 

Where  the  instniment  is  payable  at  a  bank,  presentment  for 
payment  must  be  made  during  banking  hours,  unless  the 
person  to  make  payment  has  no  funds  there  to  meet  it  at  any 
time  during  the  day,  in  which  case  presentment  at  any  hour 
before  the  bank  is  closed  on  that  day  is  sufficient. 

Variant. — The  Nebraska  statute  omits  all  of  the  section  after  the 
words  "banking  hours." 

The  language  of  this  section  is  taken  almost  word  for  word  from  the 
opinion  of  the  Court  of  Appeals  in  Salt  Springs  National  Bank  v.  Burton, 
58  N.  Y.  430. 

Where  a  note  by  its  terms  is  payable  at  a  bank,  it  is  sufficient  if  the 
note  is  there  ready  to  be  given  up  on  payment  should  the  promiser  come 
to  pay  it.  There  is  no  necessity  for  the  making  of  a  specific  or  clamorous 
demand.  If  the  promiser  does  not  go  to  the  bank  and  pay  the  note  it  is 
dishonored  and  it  would  be  but  a  ceremony  to  take  the  note  from  the 
files  and  make  a  demand  when  there  is  no  one  on  whom  to  make  it. 

Gilbert  v.  Dennis,  38  Am.  Dec.  329;  3  R.  C.  L.  1206. 

What  are  banking  hours. — The  plaintiff,  who  was  a  depositor  in  the 
defendant  savings  bank,  was  in  the  habit  of  drawing  drafts  against  her 
account  and  for  that  purpose  left  her  pass  book  at  the  bank.  A  by-law 
of  the  bank  provided  that  the  bank  should  be  open  for  business  daily  from 
10  A.  M.  to  3  p.  M.  The  bank,  however,  was  accustomed  to  open  at  9  a.  m. 
and  to  pay  drafts  before  10  o'clock.  On  one  occasion,  one  of  the  plain- 
tiff's drafts  was  presented  and  paid  at  9:30  a.  m.  The  plaintiff  went  to 
the  bank  for  the  purpose  of  stopping  payment,  but  did  not  arrive  there 
until  9:40,  when  she  was  informed  that  the  draft  had  been  paid.  In  an 
action  by  the  plaintiff  against  the  bank,  it  was  held  that  the  payment 
was  valid.  The  by-law  referred  to,  was  merely  a  regulation  for  the  con- 
venience of  the  bank  and  its  terms  did  not  show  that  it  was  in  any  way 
meant  for  the  protection  of  the  depositors. 

Butler  V.  Broadway  Saving  Institution,  177  App.  Div.  N.  Y.  682. 

The  term  banking  hours  must  be  reasonably  construed. 

Columbia  Knickerbocker  Trust  Co.  v.  Miller,  150  App.  Div.  817; 
affirmed  215  N.  Y.  191. 

In  the  case  of  German- American  Bank  v.  Milliman,  31  Misc.  Rep. 
(N.  Y.)  87,  where  the  holder  of  a  note  payable  at  a  bank  presented  it 
during  banking  hours,  and  immediately  protested  it  for  non-payment, 
it  was  claimed,  on  behalf  of  the  holder,  that  the  presentment  at  any  time 
diuing  banking  hours  on  the  day  of  matiuity  was  sufficient,  and  that 


PRESENTMENT   FOR   PAYMENT  227 

the  note  might  be  protested  at  once  and  the  protest  fees  charged  to  the 
maker.  It  was  held,  the  maker  was  entitled  to  the  entire  banking  day 
in  which  to  pay  the  note  and  that,  if  the  note  should  be  presented  and 
dishonored  and  the  maker  should  afterwards,  and  before  the  close  of 
banking  hours,  deposit  enough  money  to  pay  the  note,  the  presentment 
woiild  be  premature.  The  maker  could  not  then  be  charged  with  protest 
fees,  nor  with  interest  after  maturity,  nor  costs,  provided  his  accoimt 
was  kept  good  imtil  the  bringing  of  suit. 

Bank  of  Utica  v.  Smith,  18  Johns  230. 

Where  a  note  is  payable  at  a  bank,  it  is  sufficient  presentment  if  the 
note  is  actually  in  the  bank  at  matvirity  ready  to  be  surrendered  upon 
payment. 

Dykman  v.  Northridge,  1  App.  Div.  26,  Affd.  153  N.  Y.  662;  De 
Vergne  v.  Globe  Printing  Co.,  148  Pac.  922;  Merchants'  Bank  v.  Elderkin, 
25  N.  Y.  178. 

What  constitutes  business  hours  of  a  bank,  within  the  meaning  of  the 
section,  has  reference  to  the  general  custom  at  the  place  of  the  particular 
transaction  in  question.  The  courts  of  one  state  cannot  take  judicial 
notice  of  what  constitutes  reasonable  hours  in  a  foreign  jurisdiction. 

Colimibia  Banking  Co.  v.  Bowen,  134  Wis.  219. 

See  also,  Citizens  Central  National  Bank  v.  New  Amsterdam  Na- 
tional Bank,  128  App.  Div.  554;  Merchants  National  Bank  v.  National 
Bank  of  the  Commonwealth,  139  Mass.  513;  Exchange  Bank  v.  Bank  of 
N.  A.,  132  Mass.  14;  Manufacturers'  National  Bank  v.  Thompson,  129 
Mass.  438;  Schlessinger  v.  Shultz,  110  App.  Div.  358;  Bank  of  Syracuse  v. 
Hollister,  17  N.  Y.  46;  Merchants  Bank  v.  Spicer,  6  Wend.  443. 

§  136.  Presentment   where    principal    debtor    is    dead. 

Where  the  person  primarily  liable  on  the  instrument  is  dead, 
and  no  place  of  payment  is  specified,  presentment  for  pay- 
ment must  be  made  to  his  personal  representative,  if  such 
there  be,  and  if  with  the  exercise  of  reasonable  diligence,  he 
can  be  found. 

See  notes  Sec.  169. 

The  holder  of  a  note,  although  excused  for  making  presentment  tmder 
this  section,  he  is  not  excused  from  giving  notice  of  dishonor  to  the  in- 
dorser  if  he  wishes  to  hold  the  latter  liable  on  the  note. 

Reed  v.  Spear,  107  App.  Div.  N.  Y.  146. 

There  must  be  a  competent  and  legal  proof  of  his  death,  and  that 
the  party  upon  whom  the  demand  was  made  was  such  representative. 

Weems  v.  Farmers  Bank,  15  Md.  231. 


228  NEGOTIABLE   INSTRUMENTS    LAW 

Representatives  of  an  estate  must  be  given  reasonable  time  to  search 
for  and  examine  the  papers  and  evidences  of  the  property  of  the  deceased 
before  he  can  be  required  to  act  in  relation  to  any  of  them. 

White  v.  Stoddard,  71  Am.  Dec.  711. 

§  137.  Presentment  to  persons  liable  as  partners.  Where 
the  persons  primarily  liable  on  the  instrument  are  liable  as 
partners,  and  no  place  of  payment  is  specified,  presentment 
for  payment  may  be  made  to  any  one  of  them,  even  though 
there  has  been  a  dissolution  of  the  firm. 

This  section  makes  no  change  in  the  law  as  interpreted  before  the 
adoption  of  the  statute. 

Gates  V.  Beecher,  60  N.  Y.  519;  Greenough  v.  Smead,  3  Ohio  St.  415. 

A  demand  upon  one  partner  is  sufficient  because  he  represents  the 
firm,  and  a  dishonor  by  one  is  a  dishonor  by  all,  and  each  is  presumed  to 
have  authority  to  act  for  the  others. 

Story  on  Prom.  Notes,  Sec.  255. 

The  same  rule  applies  after  a  dissolution  of  the  partnership. 

Major  V.  Hawkes,  12  111.  298;  Robbins  v.  Fuller,  24  N.  Y.  570;  Dar- 
ling V.  Marsh,  22  Me.  184;  Fourth  National  Bank  v.  Henschen,  52  Mo.  207. 

§  138.  Presentment  to  joint  debtors.  Where  there  are 
several  persons  not  partners,  primarily  liable  on  the  instru- 
ment, and  no  place  of  payment  is  specified,  presentment  must 
be  made  to  them  all. 

To  charge  the  indorser  of  a  note  of  joint  makers  demand  must  be 
made  on  each. 

Gates  V.  Beecher,  60  N.  Y.  523;  Britt  v.  Lawson,  15  Hun.  123;  State 
of  New  York  National  Bank  v.  Kennedy,  145  App.  Div.  671;  Benedict  v. 
Schineig,  13  Wash.  477;  Davis  v.  Schmidt,  126  Wis.  461. 

In  the  case  Prior  v.  Simonson,  160  Pas.  Rep.  1035,  presentment 
was  not  made  on  one  of  the  makers  who  was  primarily  liable  and  by 
reason  thereof  recovery  could  not  be  had  against  the  indorser.  This  is 
not  only  the  plain  requirement  of  the  section  but  the  general  rule  of  law 
as  well. 

7  Cyc.  1001;  Shutts  v.  Fingar,  100  N.  Y.  539;  Benedict  v.  Schmeig, 
93  Pac.  (Wash.)  476;  36  L.  R.  A.  703;  Nave  v.  Richardson,  36  Mo.  131. 

The  reason  for  the  rule  is  well  stated  in  Taylor  v.  Davidson,  2  Cranch, 
C.  C.  Fed.  Gas.  No.  13,769  as  follows: 

"It  seems  to  me  that  the  undertaking  of  the  defendant  in  the  present 
case,  as  indorser  of  the  note,  was  that  he  would  pay  it  if  the  makers  of 


PRESENTMENT   FOR   PAYMENT  229 

the  note  did  not,  when  payment  should  have  been  properly  demanded 
of  them.  If  either  of  them  should  pay  it,  the  indorser  woiild  be  discharged. 
He  did  not  undertake  that  if  either  of  the  makers  should  refuse  to  pay  it, 
he  would;  but  that  if  all  of  them  refused  to  pay  it,  then  he  would  be 
responsible.  Otherwise  the  greater  the  number  of  makers,  the  greater 
the  risk  he  would  run  of  being  obliged  to  pay  it  in  the  first  instance;  for 
the  holder  might  choose  to  demand  it  of  the  only  insolvent  among  them. 
Upon  general  principles,  then,  I  think  that  payment  should  have  been 
demanded  of  each  of  the  makers." 

§  139.  When  presentment  not  required  to  charge  the 
drawer.  Presentment  for  payment  is  not  required  in  order 
to  charge  the  drawer  where  he  has  no  right  to  expect  or  require 
that  the  drawee  or  acceptor  will  pay  the  instrument. 

See  Baldwin  Bank  v.  Smith,  215  N.  Y.  76. 

Want  of  funds  in  the  hands  of  the  drawee  was  no  excuse  for  not 
presenting  the  bill,  if  the  drawer  had  reasonable  expectation  to  believe 
that  it  would  be  accepted  and  paid. 

Knickerbocker  Life  v.  Pendleton,  112  U.  S.  696. 

A  firm  gave  a  note  which  was  indorsed  by  one  of  the  partners.  Shortly 
before  its  maturity  the  indorser  consulted  with  the  holder  with  reference 
to  the  making  of  an  assignment  by  the  firm  and  the  partners  for  the 
benefit  of  creditors,  stating  that  neither  he  nor  the  firm  would  be  able  to 
pay  the  note  at  maturity.  Held,  that  there  was  an  implied  waiver  of 
presentment. 

In  re  Swift,  106  Fed.  65. 

Presentment  is  excused  where  the  making  of  the  check  was  a  fraud 
upon  the  part  of  the  drawer,  he  having  no  funds  in  the  bank,  and  no 
grounds  for  a  reasonable  expectation  that  it  would  be  paid. 

Beauregard  v.  Knowlton,  156  Mass.  396;  Case  v.  Morris,  31  Pa.  St. 
100;  Foster  v.  Paulk,  41  Me.  425;  Carson  v.  Fincher,  138  Mich.  666. 

§  140.  When  presentment  not  required  to  charge  the 
indorser.  Presentment  for  payment  is  not  required  in  order 
to  charge  an  indorser  where  the  instrument  was  made  or 
accepted  for  his  accommodation,  and  he  has  no  reason  to 
expect  that  the  instrument  will  be  paid  if  presented. 

Variant. — The  Illinois  statute  omits  the  last  clause  after  the  words 
"for  his  accommodation." 


In  Union  Bank  v.  SulHvan,  214  N.  Y.  342,  the  understanding  and 
agreement  was  that  they  all,  the  maker  and  indorsers  alike,  should  stand 


230  NEGOTIABLE   INSTRUMENTS   LAW 

behind  the  note,  not  separately  but  collectively.  Under  such  circum- 
stances presentment  was  not  necessary  to  charge^  the  indorsers. 

Witherow  v.  Slayback,  158  N.  Y.  649;  Haddock  v.  Haddock,  192 
N.  Y.  499. 

Where  the  indorser  of  a  promissory  note,  at  the  time  of  its  negotiation, 
promises  the  indorsee  to  look  after  the  note,  and  when  due  makes  a  similar 
promise,  presentment  and  notice  of  non-payment  are  waived. 

Dillon  V.  Bron,  150  Pac.  553;  Markland  v.  McDaniel,  51  Kan.  350; 
32Pac.  1114. 

Where  the  indorsee  of  a  note,  made  for  his  accommodation,  knew 
that  the  payee  would  look  to  him  for  pajmient,  and  that  the  accommodation 
maker  would  not  pay  it,  presentment  was  not  necessary  imder  the  statute. 

Belch  V.  Roberts,  177  S.  W.  1062;  see  also,  McDonald  v.  Luckenbach^ 
170  Fed.  434. 

§  141.  When  delay  in  making  presentment  is  excused* 

Delay  in  making  presentment  for  payment  is  excused  when 
the  delay  is  caused  by  circumstances  beyond  the  control  of 
the  holder  and  not  imputable  to  his  default,  misconduct  or 
negligence.  When  the  cause  of  delay  ceases  to  operate, 
presentment  must  be  made  with  reasonable  diligence. 

See  sec.  184. 

The  bank  taking  a  check  which  on  its  face  appeared  to  be  overdue, 
on  noticing  the  date,  had  inquired  and  ascertained  that  the  drawer,  had 
delivered  the  check  on  the  day  the  bank  received  it,  the  apparent  objection 
to  the  check  would  have  been  removed. 

Cowing  V.  Altman,  71  N.  Y.  442. 

It  is  well  settled  that  delay  in  the  presentment  of  a  check  will  relieve 
the  drawer  from  liability,  where  he  has  been  injured  by  the  delay. 

Carroll  v.  Sweet,  128  N.  Y.  19;  Kramer  v.  Grant,  60  Misc.  HI;  7 
Cyc.  977. 

Delay  in  delivery  of  mail. — Judicial  notice  may  be  taken  of  the 
relative  geographical  locations  and  for  the  transportation  of  mail  between 
the  places. 

Parks  V.  Dold  Packing  Co.,  6  Misc.  5701;  Williams  v.  Brown,  53  App. 
Div.  488;  Fitzpatrick  v.  Papa,  80  Ind.  17;  Pearce  v.  Langfil,  101  Pa.  St. 
507;  Walch  v.  Blatchley,  6  Wis.  422,  70  Am.  Dec.  469. 

Where  a  note  was  mailed  at  the  post  office  and  through  mistake  was 
carried  beyond  its  destination  and  not  presented  until  two  days  after  its 
maturity.  Held,  that  the  holder  of  the  bill  was  not  chargeable  with  a 
want  of  reasonable  diligence. 


PRESENTMENT   FOR   PAYMENT  231 

Windham  Bank  v.  Norton,  22  Conn.  214;  Pier  v.  Heinrichoffen,  67 
Mo.  163. 

Upon  learning  that  its  attempted  presentment  by  mail  had  failed, 
and  that  the  check  was  lost,  at  least  for  the  purpose  of  immediate  pre- 
sentment, defendant  owed  the  duty  to  at  once  make  substantial  present- 
ment and  demand  by  means  of  a  copy. 

Albi  V.  Bank  of  Evansville,  124  Wis.  78;  1  Parsons  Notes  and  Bills, 
368,  448,  530,  2id.  260. 

§  142.  When  presentment  may  be  dispensed  with.    Pre- 
sentment for  payment  is  dispensed  with: 

1.  Where  after  the  exercise  of  reasonable  diHgence  pre- 
sentment as  required  by  this  chapter  can  not  be  made; 

2.  Where  the  drawee  is  a  fictitious  person; 

3.  By  waiver  of  presentment  express  or  impUed. 

Subd.  I. — Failure  of  demand  will  not  be  excused  by  proof  of  the 
insolvency  of  the  maker  of  the  note. 

Smith  V.  Miller,  52  N.  Y.  554;  Manning  v.  Lyon,  70  Hun.  345. 

Where  the  drawee  suspends  payment  within  the  time  required  for 
presentment,  presentment  and  notice  of  dishonor  are  not  essential  in 
order  to  charge  the  drawer. 

Grant  v.  MacNutt,  12  Misc.  20;  Lovett  v.  Comwell,  6  Wend.  369. 

So  also,  where  the  drawee  has  no  funds  of  the  drawer  wherewith  to 
pay  the  check. 

Brush  V.  Barrett,  82  N.  Y.  400;  Grant  v.  MacNutt,  12  Misc.  20; 
Dan.  Neg.  Int.  Sec.  1596,  1597;  Erchelberger  v.  Finley,  16  Am.  Dec.  312. 

So  also,  where  the  drawee  becomes  insolvent  before  the  time  of  pre- 
sentment elapses. 

Syracuse,  etc.,  R.  R.  v.  Collins,  57  N.  Y.  641;  Planters'  Bank  v. 
Merritt,  54  Tenn.  177. 

Where  the  maker  of  a  promissory  note  within  the  state  removes 
therefrom  and  continues  to  reside  abroad  imtil  its  maturity,  the  indorser 
may  be  charged  without  demand  of  such  maker,  or  presentment  at  his 
place  of  residence  within  the  state. 

Foster  v.  Julien,  24  N.  Y.  28. 

See  also,  Reed  v.  Spear,  107  App.  Div.  (N.  Y.)  149;  Cohen  v.  Chelsea 
Exchange  Bank,  164  Supp.  75. 

Subd.  3. — The  indorser  of  a  promissory  note  may,  before  maturity, 
waive,  either  verbally  or  in  writing,  demand  and  notice  of  non-payment. 


232  NEGOTIABLE   INSTRUMENTS   LAW 

The  waiver  may  result  from  implication  or  usage,  or  from  any  under- 
standing between  the  parties  which  satisfies  the  mind  that  waiver  was 
intended. 

Cady  V.  Bradshaw,  116  N.  Y.  188;  Sheldon  v.  Horton,  43  N.  Y.  93; 
2  Dan.  Neg.  Inst.  143;  Toole  v.  Crafts,  193  Mass.  Ill;  id  196  Mass.  397; 
Annville  Bank  v.  Kettering,  106  Pa.  St.  531. 

What  facts  will  amount  to  a  waiver  is  a  question  of  law. 
Wilson  v.  Huston,  13  Mo.  146. 

The  assent,  however,  must  be  clearly  established,  and  will  not  be 
inferred  from  doubtful  or  equivocal  acts  or  language. 

Ross  V.  Hurd,  71  N.  Y.  14;  Cases  cited  under  Sec.  182;  King  v. 
Nichols,  138  Mass.  18,  23;  Torpey  v.  Tebo,  184  Mass.  307;  Iowa  Valley 
Bank  v.  Sigstad,  96  la.  491;  Farmers  Ex.  Bank  v.  Altura,  129  Cal.  263; 
Torbert  v.  Montague,  38  Colo.  325. 

A  waiver  of  protest  waives  presentment  and  notice  of  dishonor  as 
well  as  formal  protest,  but  a  waiver  of  notice  of  protest  waives  notice 
only  and  does  not  dispense  with  demand.     Sec.   182. 

Hall  V.  Crane,  213  Mass.  326;  Drinkwater  v.  Tebbits,  17  Me.  16; 
Dan.  Neg.  Inst.  (5th  ed.)  1098. 

Where  prior  to  the  matiirity  of  a  promissory  note  the  maker,  a 
corporation,  was  adjudged  a  bankrupt  upon  the  written  admission  of 
insolvency  by  its  president  who  was  the  indorser.  Held,  that  this  con- 
stitutes a  waiver  of  presentment  for  payment  and  notice  of  dishonor. 

O'Bannon  v.  Curran,  129  App.  Div.  (N.  Y.)  92;  Moore  v.  Alexander, 
63  App.  Div.  100. 

But  see,  Reinke  v.  Wright,  93  Wis.  368. 

Waiver  may  be  implied  from  the  actions  of  the  drawer  or  indorser, 
it  being  a  question  of  fact  for  the  jury  whether  such  acts  amount  to  a 
waiver. 

Bryant  v.  Wilcox,  49  Cal.  47;  Bruce  v.  Lytle,  13  Barb.  163;  Union 
Bank  v.  Magruder,  7  Peters  287;  Boyd  v.  Bank  of  Toledo,  32  Oh.  St.  526. 

The  waiver  may  be  expressed  in  strict  terms,  or  inferred  from  the 
words  and  acts  of  the  party.  The  expression  relied  upon  to  show  a  waiver 
must  have  been  made  and  intended  for  the  benefit  of  the  holder;  if  ad- 
dressed to  a  stranger  they  are  ima vailing. 

Burgettstown  Bank  v.  Nil,  213  Pa.  St.  456;  Sheldon  v.  Horton, 
43  N.  Y.  93;  Poultney  Bank  v.  Lewis,  50  Vt.  622;  Olendorf  v.  Schwartz, 
5  Cal.  480. 

In  Bird  v.  Kay,  40  App.  Div.  533  it  was  held,  that  evidence  tending 
to  show  that  the  indorser  of  a  promissory  note  waived  presentment  and 
notice  of  protest  is  not  admissible  in  an  action  brought  to  charge  him 


PRESENTMENT    FOR    PAYMENT  233 

Upon  his  contract  of  indorsement,  unless  the  facts  constituting  the  alleged 
waiver  are  set  out  in  the  complaint. 

Clift  V.  Rodger,  25  Hun.  39;  Alleman  v.  Bowen,  61  Hun.  30;  Baer  v. 
Hoffman,  150  App.  Div.  473;  Galbraith  v.  Shepard,  43  Wash.  698. 

It  is  only  when,  because  of  some  act  of  the  indorser,  the  non-pajnnent 
by  the  maker  and  a  failure  of  notice  to  the  indorser  cannot  possibly  operate 
to  the  injury  of  the  latter  that  the  omission  is  excused.  The  mere  fact 
of  insolvency  of  the  maker  is  not  enough.  The  fact  which  would  excuse 
this  presentation  must  be  some  act  in  which  the  indorser  participated, 
by  reason  of  which  the  knowledge  of  the  fact  that  the  maker  would  not 
pay  the  bill  coiild  be  of  no  benefit  to  him. 

Moore  v.  Alexander,  63  App.  Div.  (N.  Y.)  100;  O'Bannon  v.  Curran, 
129  App.  Div.  90. 

§  143.  When   instrument   dishonored  by  non-payment. 

The  instrument  is  dishonored  by  non-payment  when: 

1.  It  is  duly  presented  for  payment  and  payment  is  re- 
fused or  can  not  be  obtained;  or 

2.  Presentment  is  excused  and  the  instnmient  is  overdue 
and  unpaid. 

The  maker  of  a  promissory  note  has  tmtil  the  close  of  banking  hours 
of  the  bank,  where  the  note  is  made  payable,  in  which  to  pay  it,  and  if 
before  the  close  of  such  hours  he  deposits  money  in  that  bank  sufficient 
to  cover  the  note,  demand  of  payment  (made  by  the  holder)  earlier  on 
the  same  day  are  premature.  He  cannot  thereafter  be  lawfiilly  charged 
with  fees  of  a  protest  made  before  the  close  of  banking  hours. 

German- American  Bank  v.  Central  Bank,  31  Misc.  87;  Mills  v.  Bank 
of  United  States,  11  Wheat.  431. 

For  the  rule  where  the  note  is  payable  at  a  business  place  other  than 
a  bank,  see  Etheridge  v.  Ladd,  44  Barb.  69;  McFarland  v.  Thorpe,  8 
Cal.  626. 

Subject  generally,  see  Sections  121,  135;  Planters  Bank  v.  Markham, 
6  Miss.  397;  Osborn  v.  Rogers,  112  N.  Y.  573;  Hills  v.  Place,  48  N.  Y. 
520;  Merchants  Bank  v.  Elderkin,  25  N.  Y.  178. 

§  144.  Liability  of  person  secondarily  liable,  when  instru- 
ment dishonored.  Subject  to  the  provisions  of  this  chapter, 
when  the  instrument  is  dishonored  by  non-payment,  an 
immediate  right  of  recourse  to  all  parties  secondarily  liable 
thereon,  accrues  to  the  holder. 


234  NEGOTIABLE   INSTRUMENTS   LAW 

Justice  Sutherland  in  31  Misc.  96,  in  referring  to  this  section  said: 
"If  Section  144  is  to  be  construed  as  applying  to  notes  payable  at  a  bank, 
it  might  be  argued  with  much  force  that  the  Legislature  intended  to  permit 
an  indorser  to  be  sued  on  the  day  the  note  falls  due,  and  even  before  the 
close  of  banking  hours,  provided  an  early  demand  be  made.  I  hardly 
think  that  any  such  startHng  innovation  was  intended." 

The  indorser  of  a  note,  when  his  liability  is  fixed  by  notice  and  pro- 
test, becomes  an  independent  and  principal  debtor,  and  does  not  stand 
to  an  indorser  for  value,  in  the  position  of  a  mere  surety  for  the  maker  of 
the  note. 

German  Am.  Bank  v.  Niagara  Cycle  Co.,  13  App.  Div.  451;  First 
National  Bank  v.  Wood,  71  N.  Y.  405,  411;  Edw.  Bills  (3d  ed.)  Sec.  765. 

While  an  indorser  of  a  promissory  note  is  said  to  be  secondarily 
liable,  the  holder  of  a  note  may  sue  both  the  maker  and  the  indorser,  or 
either,  and  an  indorser  sued  upon  his  contract  of  indorsement  is  abso- 
lutely liable  thereon. 

Curtis  V.  Atlantic  National  Bank,  215  N.  Y.  397. 

A  bill  or  note  does  not  lose  its  negotiable  character  by  being  dis- 
honored. If  originally  negotiable  it  may  pass  from  hand  to  hand  ad 
infinitum  imtil  paid  by  the  drawer,  and  the  indorsement  although  made 
after  dishonor,  follows  the  nature  of  the  original  contract,  and  is  negotiable 
tmless  it  contains  express  words  of  restriction. 

Leavitt  v.  Putnam,  3  N.  Y.  494. 

Where  a  negotiable  promissory  note  has  been  protested  for  non- 
payment, and  the  liability  of  the  indorsers  thereof  has  been  fixed  by 
notice,  such  indorsers  selling  such  notes  without  erasing  their  indorsement 
will  be  held  responsible  for  the  payment  of  the  same,  although  no  notice 
be  given  to  them  of  its  non-payment  by  the  maker. 

St.  John  V.  Roberts,  31  N.  Y.  441. 

Guaranty. — If  the  agreement  was  an  imconditional  guaranty  of 
payment,  then  the  plaintiff's  right  of  action  on  the  guaranty  was  com- 
plete when  the  makers  of  the  notes  failed  to  pay  according  to  the  terms 
thereof. 

Brown  v.  Curtis,  2  N.  Y.  225,  227;  Stein  v.  Whitman,  209  N.  Y.  576. 

The  meaning  of  the  guaranty  depends  upon  the  intention  of  the 
parties. 

Hamilton  v.  Van  Rensselaer,  43  N.  Y.  244;  Melnick  v.  Knox,  44 
N.  Y.  676;  Catskill  National  Bank  v.  Dimiary,  206  N.  Y.  550;  Bank  v. 
Gay,  57  Conn.  224;  Walker  v.  Forbes,  25  Ala.  139. 

An  agreement  guaranteeing  the  "full,  prompt,  and  ultimate  pajrment" 
of  notes  and  of  "any  and  all  renewals  thereof  or  either  of  them,"  etc.,  as 
the  words  "full  and  prompt  payment"  would  be  inapt  if  all  that  the  parties 


PRESENTMENT   FOR   PAYMENT  235 

intended  was  afguaranty  of  collection,  the  word  "ultimate"  was  intended 
to  include  renewal  notes  and  not  to  limit  the  guaranty  to  loans  unpaid 
after  diligent  effort  to  collect,  and  the  intention  of  the  parties  and  eflEect 
of  the  agreement  was  an  unconditional  guaranty  of  the  payment  of  the 
notes  or  renewals  according  to  the  terms  thereof. 

First  National  Bank  of  Litchfield  v.  Jones,  219  N.  Y.  312. 

FORM  OF  GUARANTY 

19 

For  and  in  consideration  of  the  sum  of  $i,  the  receipt  whereof  is  hereby 
acknowledged,  the  advancement  of  moneys,  the  giving  and  extending  of  credit 

by  the ^^«^ 

of io. ... 

and  of  other  valuable  considerations,  I  hereby  agree  to  pay  or  cause  to  be  paid 
to  the Bank  all  loans,  drafts,  over- 
drafts, endorsements,  accounts,  checks,  notes,  interests,  demands  and  liabilities 
of  every  kind  or  description  now  owing  or  which  may  hereafter  become  due 

or   owing   by   said to   it   whenever   the   same   or 

any  part  thereof  shall  be  due.  All  proceedings  to  collect  from  the  principal 
debtor,  or  any  one  else,  are  expressly  waived  and  I  waive  demand,  notice  and 
proceedings  of  every  kind,  and  agree  that  the  said  bank  may,  without  notice, 
surrender  or  release  securities  held  by  it  and  grant  extensions  of  time  to,  and 
from  time  to  time  renew  any  obligations  of  said  principal  debtor  without 
notice.     This  is  a  continuing  guarantee. 

(Seal) 

§  145.  Time  of  maturity.  Every  negotiable  instrument 
is  payable  at  the  time  fixed  therein  without  grace.  When  the 
day  of  maturity  falls  upon  Sunday,  or  a  holiday,  the  instru- 
ment is  payable  on  the  next  succeeding  business  day.  Instru- 
ments falling  due  or  becoming  payable  on  Saturday  are  to  be 
presented  for  payment  on  the  next  succeeding  business  day, 
except  that  instnunents  payable  on  demand  may,  at  the 
option  of  the  holder,  be  presented  for  payment  before  twelve 
o'clock  noon  on  Saturday  when  that  entire  day  is  not  a  holiday. 

Variant.— The  statutes  of  Arizona,  Kentucky  and  Wisconsin  omit 
the  last  sentence  beginning  "Instruments  falHng  due."  The  Colorado 
statute  substitutes  the  following:  "Instruments  falling  due  on  any  day, 
in  any  place,  wherein  part  of  such  day  is  a  holiday,  are  to  be  presented 


236  NEGOTIABLE    INSTRUMENTS    LAW 

for  payment  on  the  next  succeeding  business  day,  except  that  instru- 
ments payable  on  demand  may,  at  the  option  of  the  holder,  be  presented 
for  payment  during  any  reasonable  hoiirs  of  the  part  of  such  day  which 
is  not  a  holiday."  The  Delaware  statute  omits  the  word  "business"  in 
second  sentence.  The  Iowa  statute  has  added  a  new  subdivision  as  fol- 
lows: "A  demand  made  on  any  one  of  the  three  days  following  the  day 
of  maturity  of  the  instrument,  except  on  Sunday  or  a  holiday,  shall  be  as 
effectual  as  though  made  on  the  day  on  which  demand  may  be  made 
under  the  provisions  of  this  act,  and  the  provisions  of  this  act  as  to  notice 
of  non-payment,  non-acceptance,  and  as  to  protest  shall  be  applicable  with 
reference  to  such  demand  as  though  the  demand  were  made  in  accordance 
with  the  terms  of  this  act;  but  the  provisions  of  this  section  shall  not  be 
construed  as  authorizing  demand  on  any  day  after  the  third  day  from 
that  on  which  the  instrument  falls  due  according  to  its  face."  The  Mas- 
sachusetts statute  (Laws  of  1899,  Chapter  130),  has  amended  the  section 
to  read  as  follows:  "On  all  drafts  and  bills  of  exchange  made  payable 
within  this  Commonwealth,  at  sight,  three  days  of  grace  shall  be  allowed 
unless  there  is  an  expressed  stipulation  therefor  to  the  contrary."  The 
New  Hampshire  statute  makes  the  same  provision.  The  North  Carolina 
statute  adds  the  following:  "All  bills  of  exchange  payable  within  this 
state,  at  sight,  in  which  there  is  no  expressed  stipulation  to  the  contrary, 
and  not  otherwise,  shall  be  entitled  to  days  of  grace  as  the  same  are 
allowed  by  the  custom  of  merchants  on  foreign  bills  of  exchange,  payable 
at  the  expiration  of  a  certain  period  after  date  or  sight;  provided,  that  no 
days  of  grace  shall  be  allowed  on  any  bill  of  exchange,  promissory  note, 
or  draft  payable  on  demand."  The  Rhode  Island  statute  adds  the  words 
"except  sight  drafts"  after  the  word  "instrviment"  in  the  first  sentence. 
The  statutes  of  Arkansas,  Florida,  Indiana,  Kansas,  Maryland,  Michigan, 
Minnesota,  Missoiui,  Montana,  Nebraska,  Nevada,  New  Jersey,  New 
York,  North  Carolina,  Ohio,  Oklahoma,  Oregon,  Pennsylvania,  Tennessee, 
Utah,  Virginia  and  Washington  add  the  words  "becoming  payable"  after 
the  words  "instnmients  falling  due."  The  New  Hampshire  and  Massa- 
chusetts statutes  use  the  words  "or  payable." 


"All  checks,  bills  of  exchange  or  drafts  appearing  on  their  face  to 
have  been  drawn  upon  any  bank  or  individual  banker  carrying  on  banking 
business  imder  the  laws  of  this  state,  which  are  on  their  face  payable  on 
any  specified  day  or  in  any  nimiber  of  days  after  the  date  or  sight  thereof, 
shall  be  deemed  due  and  payable  on  the  day  mentioned  for  the  payment 
of  the  same,  without  any  days  of  grace  being  allowed,  and  it  shall  not  be 
necessary  to  protest  the  same  for  non-acceptance." 

Section  101,  Banking  Law,  State  of  New  York. 


PEESENTMENT    FOE   PAYMENT  237 

As  the  time  when  a  bill  matures  manifestly  relates  to  matters  of 
performance,  it  is  governed  by  the  law  of  the  place  where  the  bill  is  pay- 
able, and  not  the  law  of  the  place  where  it  is  drawn  or  indorsed. 

Bowen  v.  Newell,  13  N.  Y.  290. 

The  rule  as  to  presentment  on  Saturday  is  found  in  Sylvester  v. 
Crohan,  138  N.  Y.  494. 

A  note  providing  "On  or  before  one  year  after  date  I  promise  to  pay" 
matures  one  year  after  its  date. 

Third  National  Bank  v.  Bowman,  50  App.  Div.  (N.  Y.)  66. 

Negotiable  instnmients  maturing  on  a  holiday  become  payable  on 
the  day  following. 

Morel  V.  Stearns,  37  Misc.  Rep.  (N.  Y.)  486. 

§  146.  Time;  how  computed.  Where  the  instrument  is 
payable  at  a  fixed  period  after  date,  after  sight,  or  after  the 
happening  of  a  specified  event,  the  time  of  payment  is  deter- 
mined by  excluding  the  day  from  which  the  time  is  to  begin 
to  run,  and  by  including  the  date  of  payment. 

The  General  Construction  Law  of  the  several  states  should  be  con- 
sulted in  connection  with  this  section;  as  to  New  York  see,  L.  1909,  ch. 
27;  Sections  20,  24,  25. 

A  note  payable  on  demand  and  a  note  payable  on  demand  after 
date  are,  for  the  purpose  of  the  running  of  the  Statute  of  Limitations, 
deemed  due  and  payable  respectively  on  the  day  of  the  date  of  the  note 
and  on  the  day  following  without  any  demand. 

Hardon  v.  Dixon,  77  App.  Div.  (N.  Y.)  241;  McMullen  v.  Rafferty, 
89  N.  Y.  456;  Crim  v.  Starkweather,  88  N.  Y.  339. 

Where  the  term  "month"  is  used  and  there  is  nothing  to  indicate 
a  different  meaning,  it  is  construed  as  a  calendar  month,  and  in  computing 
a  calendar  month  the  days  are  not  counted  but  reference  is  made  to  the 
calendar.  For  example,  a  note  dated  July  1st  and  payable  "three  months 
after  date"  matures  on  the  first  day  of  October  following. 

Doyle  V.  First  National  Bank,  131  Ala.  294;  Roehner  v.  Knicker- 
bocker Ins.  Co.,  63  N.  Y.  163. 

§  147.  Rule  where  instrument  payable  at  bank.  Where 
the  instnmient  is  made  payable  at  a  bank  it  is  equivalent  to  an 
order  to  the  bank  to  pay  the  same  for  the  account  of  the 
principal  debtor  thereon. 

Variant. — The  Illinois  and  Nebraska  statutes  omit  this  section. 


238  NEGOTIABLE   INSTRUMENTS   LAW 

An  acceptance  of  a  promissory  note  payable  at  a  bank  is,  if  the  party 
is  in  funds,  that  is,  has  the  amount  to  his  credit,  equivalent  to  a  check; 
and  is  in  effect  an  order  or  draft  on  the  banker,  in  favor  of  the  holder  for 
the  amount  of  the  note  or  acceptance. 

Aetna  National  Bank  v.  Fourth  National  Bank,  46  N.  Y.  82;  National 
Hudson  Bank  v.  K.  &  H.  R.  R.  Co.,  17  App.  Div.  (N.  Y.)  232. 

A  depositor  who  makes  a  note  payable  at  a  bank  by  imphcation 
authorizes  the  bank  to  pay  the  note  and  charge  it  to  his  account. 

Aetna  Bank  v.  Fourth  National  Bank,  46  N.  Y.  82;  Baldwin  Bank  v. 
Smith,  215  N.  Y.  76;  Heinrich  v.  Bank  of  Middletown,  164  App.  Div.  960; 
113N.  E.  Rep.  531. 

It  is  incumbent  on  the  holder  to  secure  payment,  and  loss  resulting 
from  his  neglect  should  fall  upon  him,  not  on  the  drawer,  who  has  no 
further  duty  to  perform.  I  am  imable  to  perceive  why  the  same  rule 
does  not  hold  good  in  the  case  of  a  note  payable  at  a  bank  where  the  maker 
has  fimds  to  meet  it  at  maturity,  especially  since  such  a  note  is  by  statute 
made  the  equivalent  of  a  check.  To  the  extent  that  he  has  appropriated 
his  credit,  he  is  not  called  upon  to  look  after  it,  but  discharges  his  duty  by 
keeping  his  account  good.  None  of  the  cases  in  this  jurisdiction  holding 
that  the  maker  of  a  note  payable  at  a  bank  is  not  exonerated  by  the 
holder's  failure  to  present  it  for  payment  involved  the  question  of  a  loss 
resulting  from  such  failure. 

Baldwin  Bank  v.  Smith,  215  N.  Y.  80;  see  also.  Hills  v.  Place,  48 
N.  Y.  522;  Stansbury  v.  Emberg,  128  Tenn.  105. 

The  relation  of  debtor  and  creditor,  not  agent  and  principal,  exists 
between  a  bank  and  its  depositor. 

Aetna  National  Bank  v.  Fourth  National  Bank,  46  N,  Y.  82;  Jordan  v. 
National  S.  and  L.  Bank,  74  N.  Y.  467;  Straus  v.  Tradesmen's  National 
Bank,  122  N.  Y.  379;  Shipman  v.  Bank  of  State  of  N.  Y.,  126  N.  Y.  318; 
Cassidy  v.  Ultmann,  170  N.  Y.  505;  Burton  v.  United  States,  196  U.  S. 
283;  Taft  v.  Quinsigamond  Bank,  172  Mass.  363. 

The  money  deposited  becomes  a  part  of  the  bank's  general  funds. 
The  bank  impliedly  contracts  to  pay  its  depositor's  checks,  acceptances, 
notes  payable  at  the  bank,  and  the  like,  to  the  amount  of  his  credit. 

Citizens  National  Bank  v.  Importers  and  Traders  Bank  of  N.  Y., 
119  N.  Y.  195;  Nineteenth  Ward  Bank  v.  First  National  Bank  of  Wey- 
mouth, 184  Mass.  49. 

If  maturing  paper  is  left  with  the  banker  for  collection,  he  becomes 
the  agent  of  the  holder  to  receive  payment,  but  unless  the  banker  is 
made  the  holder's  agent  by  a  deposit  of  the  paper  with  him  for  collection, 
he  has  no  authority  to  act  for  the  holder. 

Adams  v.  Hackensack,  44  N.  J.  L.  638. 


PRESENTMENT   FOE   PAYMENT  239 

A  check  presented  for  payment  to  the  bank  on  which  it  is  drawn  is 
never  paid  by  the  mere  receipt,  presentation  and  retention  of  it,  and  is 
paid  only  by  the  transfer  of  credits,  or  by  the  actual  delivery  of  the  money, 
and  turning  it  into  a  voucher  by  cancellation. 

Mayer  v.  Heidelbach,  123  N.  Y.  332;  Pratt  v.  Foote,  9  N.  Y.  463; 
National  Butchers  and  Drovers  of  N.  A.,  165  N.  Y.  132;  Nineteenth  Ward 
Bank  v.  First  National  Bank,  184  Mass.  49;  Exchange  Bank  v.  Sutton 
Bank,  78  Md.  577;  Bank  of  the  Republic  v.  Millard,  10  Wall.  152;  Pollack 
Bros.  V.  Niall,  137  Ga.  23;  Moore  v.  Meyer,  57  Ala.  201;  Sutherland  v. 
First  National  Bank,  31  Mich.  230;  Moore  v.  Norman,  52  Minn.  83; 
Smith  V.  Mitchell,  117  Ga.  772. 

A  bank  is  not  bound  to  take  notice  of  a  memorandum  or  figures  on 
check  placed  there  by  the  depositor  merely  for  his  own  information  or 
convenience. 

State  National  Bank  v.  Dodge,  124  U.  S.  333. 

Drawing  check  against  insufficient  funds. — In  order  to  convict  a 
person  issuing  a  check  against  insufficient  funds  criminal  intent  must  be 
shown.  It  is  not  necessary,  however,  to  prove  that  the  check  was  pre- 
sented to  the  bank. 

People  V.  Mohr,  109  Pac.  476;  People  v.  Weir,  159  Pac.  442;  People  v. 
Dilcher,  38  Misc.  89;  People  v.  Lipp,  111  App.  Div.  (N.  Y.)  504. 

Overdraft  Payments. — The  relation  of  banker  and  depositor  is  the 
relation  of  debtor  and  creditor.  The  depositor  when  he  deposits  money 
in  a  bank  becomes  the  creditor  of  that  bank  and  the  bank  becomes  his 
debtor  for  amount  of  money  deposited.  The  depositor  is  entitled  to  draw 
orders  by  checks,  drafts  or  notes,  for  the  payment  of  money,  upon  the 
bank,  and  the  bank  if  indebted  to  the  drawer  of  the  order  in  an  amount 
equal  or  in  excess  of  that  appearing  upon  the  order,  must  pay  it  upon 
presentation  for  payment,  and  for  any  balance  due  the  depositor  the  bank 
is  the  debtor  for  that  balance. 

When  the  depositor  draws  upon  the  bank  in  excess  of  the  amount  the 
bank  is  indebted  to  him,  and  the  bank  honors  the  order  and  pays  it,  such 
payment  by  the  bank  is  a  loan  made  to  the  depositor,  and  if  the  loan  is 
not  made  good  the  bank  may  then  sue  for  the  repayment  of  the  loan,  upon 
the  implied  promise  on  the  part  of  the  person  to  whom  the  loan  was 
made  to  repay  the  same. 

On  the  other  hand,  when  the  bank  is  indebted  to  the  depositor  in 
an  amount  exceeding  that  appearing  upon  his  order  presented,  the  bank 
must  pay  if  it  the  order  is  regular  in  all  respects. 

People's  Bank  v.  Rhodes,  90  Atl.  409;  Merchants'  National  Bank  v. 
National  Eagle  Bank,  101  Mass.  281;  Citizens  Central  Bank  v.  New 


240  NEGOTIABLE   INSTRUMENTS   LAW 

Amsterdam  National  Bank,  128  App.  Div.  (N.  Y.)  554;  National  Bank 
of  N.  J.  V.  Berrall,  70  N.  J.  L.  757. 

An  "overdraft"  by  a  depositor  of  a  bank  is  in  the  nature  of  a  loan 
made  at  the  request  of  the  depositor,  and  impHes  a  promise  to  pay;  and  no 
allegation  of  a  promise  to  pay  is  necessary  in  a  complaint  upon  an  over- 
draft due  to  the  issuance  of  a  New  York  draft  which  exceeded  the  balance 
in  a  depositor's  accoimt. 

Becker  v.  Fuller,  164  N.  Y.  Supp.  495;  Morse  on  Banks  and  Banking, 
357;  Middleton  v.  Rhoades,  90  Atl.  409;  Hudson  Trust  Co.  v.  Chappelle, 
108  N.  Y.  Supp.  1005. 

The  drawing  of  a  check  by  a  depositor  in  a  sum  greater  than  the 
amount  which  he  has  on  deposit  in  itself  implies  a  promise  on  the  part 
of  the  depositor  to  repay  to  the  bank  the  amoimt  by  which  the  accoimt 
is  overdrawn.  It  is  usually  held,  however,  that  the  bank  is  not  entitled 
to  interest  on  the  amount  of  the  overdraft  until  it  has  made  a  demand  on 
the  depositor  for  repayment  and  that  interest  nms  from  date  of  such 
demand.  Owens  v.  Stapp,  32  111.  App.  653.  Hubbard  v.  Charlestown 
Branch  R.  R.  Co.,  52  Mass.  24. 

Where  the  drawer's  accoimt  is  not  sufficient  to  pay  the  check  the 
bank  is  not  supposed  to  make  a  partial  payment. 

Harrington  v.  First  National  Bank,  85  111.  App.  212. 

Stopping  Payment. — The  order  to  stop  payment  must  be  com- 
municated to  the  bank  before  the  check  to  which  it  refers  has  been  paid. 

Brandt  v.  Public  Bank,  139  N.  Y.  App.  Div.  173,  123  N.  Y.  Supp. 
207;  32  B.  L.J.  707. 

A  stop  payment  order,  to  be  binding  on  the  bank  must  accurately 
describe  the  check  to  which  it  refers. 

Mitchell  V.  Security  Bank,  147  N.  Y.  Supp.  470. 

In  the  absence  of  a  rule  of  the  bank  that  stop  orders  must  be  in 
writing,  a  verbal  notice  is  sufficient. 

People's  Savings  Bank  &  Trust  Company  v.  Lacey,  146  Ala.  688, 
400  So.  Rep.  346. 

The  certification  of  a  check  by  the  drawee  bank  terminates  the 
drawer's  right  to  stop  payment. 

National  Commerical  Bank  v.  Miller,  77  Ala.  168. 

If  a  bank  pays  a  check  after  payment  has  been  stopped,  it  cannot 
charge  the  amount  against  the  depositor's  account. 

German  National  Bank  v.  Farmers'  Deposit  National  Bank,  118 
Pa.  St.  294,  12  Atl.  Rep.  303;  32  B.  L.  J.  705. 

As  the  rights  and  liabihty  arising  out  of  the  failure  of  a  bank  to  com- 
ply with  an  order  stopping  payment  of  a  check,  see  Usher  v.  Tucker,  217 


PBESENTMENT   FOR   PAYMENT  241 

Mass.  441,  105  N.  E.  360,  L.  R.  A.  1916F,  826;  American  Defense  Society 
V.  Sherman  National  Bank,  176  App.  Div.  250. 

A  bank  which  pays  a  check  after  payment  has  been  stopped  is  respon- 
sible to  the  drawer,  although  the  pass  books  of  the  bank  contain  a  stipula- 
tion that  while  the  bank  will  endeavor  to  execute  stop  orders,  it  "shall 
not  be  responsible  for  the  execution  of  an  order  to  stop  pajmient." 

Elder  v.  Franklin  National  Bank,  25  Misc.  Rep.  (N.  Y.)  716,  55 
N.  Y.  Supp.  576. 


NOTICE  TO  STOP  PAYMENT  ON  CHECK 
To  the Bank, 


Dear  Sirs: 

Please  stop  payment  on  check  No .for  $ 

dated ,  ig ,  payable  to 

,   signed  as  follows: 

The  undersigned  hereby  agrees  to  reimburse  you  for  all  damages,  cost 
and  expense  to  which  you  may  be  subjected  by  reason  of  refusal  to  honor  said 
check,     (i). 


(i).  //  desired,  add  ^'and  to  furnish  due  and  sufficient  security  therefor 
whenever  demanded.^' 

Order  in  which  checks  should  be  paid. — Had  the  banks  chosen  to 
take  up  the  checks  in  the  order  of  their  date  and  pay  them  as  far  as  the 
drawer's  money  would  go,  who  could  complain.  The  holders  of  checks 
not  paid  would  have  no  standing  to  make  a  demand  from  the  bank. 

Reinish  v.  Consolidated  Bank,  45  Pa.  Sup.  Ct.  236;  Mt.  Sterling 
National  Bank  v.  Green,  35  S.  W.  (Ky.)  911. 

Drawer's  death  revokes  check. — A  check  is  not  the  assignment  of 
the  fund  on  deposit  to  the  credit  of  the  drawer  pro  tanto,  and  the  holder 
is  merely  the  agent  of  the  drawer  for  the  purpose  of  collecting  it,  and  upon 
the  death  of  the  drawer  before  presentation  the  authority  of  the  holder 
is  revoked,  and  the  bank  is  no  longer  authorized  to  pay;  but  on  principles 
of  necessity  incident  to  the  banking  business,  if  the  bank  pays  in  good 
faith  and  without  notice  of  the  death  of  the  drawer,  it  is  protected. 

Glennan  v.  Rochester  Trust  &  Safe  Deposit  Co.,  209  N.  Y.  12,  102 
N.  E.  537,  52  L.  R.  A.  (N.  S.)  302;  Ballach  v.  Frelinghuysen,  15  Fed.  675; 


242  NEGOTIABLE   INSTRUMENTS   LAW 

Stein  V.  Empire  Co.,  148  App.  Div.  850;  Citizens  State  Bank  v.  Cowles, 
180  N.  Y.  346;  Weiland  v.  State  Bank,  112  Ky.  310;  Pullen  v.  Placer 
Co.  Bank,  71  Pac.  (Cal.)  83. 

The  same  rule  applies  to  a  drawer  after  he  is  adjudged  a  bankrupt. 

First  National  Bank  v.  Selden,  120  Fed.  212;  La  Clede  v.  Schuler, 
120U.  S.  511. 

For  the  rule  in  Massachusetts,  see  Laws  of  1885. 

§  148.  What  constitutes  payment  in  due  course.  Pay- 
ment is  made  in  due  course  when  it  is  made  at  or  after  the 
maturity  of  the  instrtunent  to  the  holder  thereof  in  good  faith 
and  without  notice  that  his  title  is  defective. 

Where  a  note  is  surrendered  to  the  maker  in  exchange  for  a  worthless 
check,  this  does  not  constitute  payment. 

Hogan  V.  Kaiser,  et  al.,  88  S.  W.  (Kas.)  1128. 

Where  a  check  was  offered  and  received  by  the  drawee  bank  as  a 
deposit,  credited  to  the  depositor's  accotmt,  and  charged  to  the  account 
of  the  drawer,  the  transaction  constituted  complete  pa^Tnent  of  the 
check,  and  could  not  be  rescinded  except  for  fraud  or  actual  mistake. 

American  National  Bank  v.  Miller,  185  Fed.  338. 

Possession  of  a  negotiable  instrument  is  generally  the  sole  adequate 
evidence  of  apparent  authority  to  collect  upon  which  the  debtor  has  any 
right  to  rely,  or  can,  without  negligence,  do  so. 

Boyd  V.  Lybrand,  113  Wis.  79;  Joy  v.  Vance,  104  Mich.  97;  Bigger- 
staff  V.  Marston,  161  Mass.  101. 

A  check  for  judicial  purposes  at  least,  cannot  be  regarded  as  having 
been  paid  unless  the  amount  therein  called  for  has  been  paid  to  the  payee 
or  to  one  authorized  by  him  to  receive  the  proceeds,  that  is  to  one  author- 
ized by  the  payee  to  indorse  his  name  thereon. 

Sigel  V.  Kovinsky,  93  Misc.  541,  affirmed  in  174  App.  Div.  857. 

The  affirmative  defense  of  payment  is  not  established  by  verbal 
admissions  resting  solely  on  the  testimony  of  interested  parties;  when  the 
presumption  of  non-payment  arising  from  possession  of  the  note  is  fortified 
by  positive  testimony  of  non-payment. 

Hoch  V.  Bernstein,  164  N.  Y.  Supp.  113. 


NOTICE    OF   DISHONOE  243 

ARTICLE  9. 

Notice  of  Dishonor 

Section  i6o.  To  whom  notice  of  dishonor  must  be  given. 

161.  By  whom  given. 

162.  Notice  given  by  agent. 

163.  Effect  of  notice  given  on  behalf  of  holder. 

164.  Effect  where  notice  is  given  by  party  entitled 

thereto. 

165.  When  agent  may  give  notice. 

166.  When  notice  sufficient. 

167.  Form  of  notice. 

168.  To  whom  notice  may  be  given. 

169.  Notice  where  party  is  dead. 

170.  Notice  to  partners. 

171.  Notice  to  persons  jointly  liable. 

172.  Notice  to  bankrupt. 

173.  Time  within  which  notice  must  be  given. 

174.  Where  parties  reside  in  same  place. 

175.  Where  parties  reside  in  different  places. 

176.  When  sender  deemed  to  have  given  due  notice. 

177.  Deposit  in  post-office;  what  constitutes. 

178.  Notice  to  antecedent  party;  time  of. 

179.  Where  notice  must  be  sent. 

180.  Waiver  of  notice. 

181.  *  Whom  affected  by  waiver. 

182.  Waiver  of  protect. 

183.  When  notice  dispensed  with. 

184.  Delay  in  giving  notice;  how  excused. 

185.  When  notice  need  not  be  given  to  drawer. 

186.  When  notice  need  not  be  given  to  indorser. 


244  NEGOTIABLE   INSTRUMENTS   LAW 

187.  Notice     of     non-payment     where     acceptance 

refused. 

188.  Effect    of    omission    to    give    notice    of    non- 

acceptance. 

189.  When  protest  need  not  be  made;  when  must  be 

made. 

§  160.  To   whom   notice   of   dishonor   must   be   given. 

Except  as  herein  otherwise  provided,  when  a  negotiable  instru- 
ment has  been  dishonored  by  non-acceptance  or  non-pay- 
ment, notice  of  dishonor  must  be  given  to  the  drawer  and  to 
each  indorser,  and  any  drawer  or  indorser  to  whom  such 
notice  is  not  given  is  discharged. 

One  of  three  indorsers  of  a  note  cannot  have  contribution  from  the 
others  as  co-sureties  for  their  proportional  share  of  the  amoiint  paid  by 
him  on  the  note,  without  showing  presentment  and  notice,  since  he  cannot 
by  paying  the  note  deprive  co-sureties  of  their  right  to  presentment  and 
notice. 

Bennett  v.  Kistler,  103  N.  Y.  Supp.  555. 

Service  of  notice  upon  an  antecedent  party  is  not  shown  by  the  mere 
testimony  of  the  notary  that,  not  knowing  the  address  of  the  indorser,  he 
enclosed  the  notice  of  dishonor  to  a  subsequent  indorser  with  postage 
for  forwarding  the  same  to  the  prior  indorser. 

Fuller  Buggy  Co.  v.  Waldron,  112  App.  Div.  814. 

Where  instrument  has  been  dishonored  a  guarantor  of  a  negotiable 
instrument  becomes  fixed  with  liabiUty  immediately  upon  default  of  the 
principal  debtor;  and  failure  upon  the  part  of  the  holder  to  give  notice  of 
such  defatilt  does  not  discharge  the  guaranty. 

Marshall  v.  HoUingsworth,  166  Ky.  190. 

Where  a  negotiable  promissory  note  has  been  protested  for  non- 
payment and  the  liability  of  the  indorsers  thereof  has  been  fixed  by  notice, 
such  indorsers  selling  such  note,  without  erasing  their  indorsements,  will 
be  held  responsible  for  the  payment  of  the  same,  though  no  notice  be  given 
to  them  of  its  non-payment  by  the  maker.  In  such  case  the  defendants 
are  estopped  by  their  acts  from  controverting  their  liability  on  the  note, 
as  indorsers  thereof. 

St.  John  V.  Roberts,  31  N.  Y.  441. 

Where  an  indorser  is  dead,  notice  must  be  sent  to  his  executor  or 
administrator;  and  if  no  person  has  been  appointed,  or  it  cannot  be  ascer- 


NOTICE    OF   DISHOlSrOE  24:5 

tained  by  the  use  of  due  diligence  who  or  where  he  or  they  have  been 
appointed  can  be  found,  notice  must  be  forwarded  to  the  last  place  of 
residence  of  the  deceased.  Hence  the  death  of  the  indorser  is  no  excuse 
for  the  neglect  to  give  notice. 

Parsons  on  Bills  and  Notes,  526;  see  also.  Bank  of  Jefferson  v.  Darling, 
91  Hun.  236;  Deininger  v.  Miller,  7  App.  Div.  (N.  Y.)  409;  Reed  v.  Spear, 
107  App.  Div.  144. 

Where  a  check  has  been  presented  for  payment  and  payment  has 
been  refused,  notice  of  dishonor  must  be  given  to  the  drawer  and  each 
indorser. 

Cassell  V.  Regier,  114  N.  Y.  Supp.  601;  see  Sec.  180. 

An  accommodation  indorser  is  entitled  to  notice. 

Bradley  v.  Buchanan,  21  Kans.  274;  Perry  v.  Taylor,  148  N.  C.  362. 

The  same  is  true  even  though  they  are  the  directors  of  the  corporation 
by  which  the  note  was  made. 

Houser  v.  Tayssoux,  83  S.  E.  672;  McDonald  v.  Luckenbach,  170 
Fed.  434;  Houser  v.  Fayssoux,  168  N.  C.  1. 

A  bank  holding  an  indorsed  note  for  collection  may  give  notice  of  its 
dishonor  to  all  parties  Hable  thereon,  or  only  to  its  principal  from  whom  it 
received  the  note,  leaving  the  latter  to  notify  in  tiim  its  principal  or  ante- 
cedent indorser,  and  so  on  down  the  line. 

Gleason  v.  Thayer,  86  Conn.  248;  Bird  v.  State  Bank,  93  U.  S.  96; 
3  R.  C.  L.  622. 

The  holder  of  a  bank  check  is  entitled  to  an  unqualified  notice  of  its 
dishonor  by  the  drawee  before  he  is  required,  in  order  to  hold  an  indorser, 
to  notify  him  that  payment  has  been  refused. 

Citizens  Bank  v.  Bank  of  Pleasant ville,  135  la.  605. 

A  bank  which  receives  a  note  for  collection  from  another  bank  may 
give  notice  either  to  all  the  parties  or  to  the  bank  from  which  it  received 
the  note,  which  can  then  notify  antecedent  parties. 

Gleason  v.  Thayer,  87  Atl.  (Conn.)  790. 

Where  one  contracts  in  the  form  of  a  guaranty  upon  the  back  of  a 
promissory  note,  he  cannot  be  made  liable  as  an  indorser,  nor  can  he  set 
up  the  defense  of  want  of  demand  and  notice  of  dishonor. 

Brown  v.  Curtiss,  2  N.  Y.  225. 

The  loss  of  a  note  does  not  excuse  compliance  with  this  section  and 
Sections  167  and  174. 

Klotz  V.  Silver,  127  N.  Y.  Supp.  1090. 

The  holder  of  a  promissory  note  is  presumed,  in  the  absence  of  proof 
to  the  contrary,  to  know  the  person  and  residence  of  his  immediate  in- 
dorser. 

Lawrence  v.  Miller,  16  N.  Y.  235. 


246  NEGOTIABLE   INSTRUMENTS   LAW 

Merely  looking  in  the  directory  for  his  address  is  not  sufficient. 

Bacon  v.  Hanna,  137  N.  Y.  382. 

A  person,  not  otherwise  a  party,  placing  his  name  in  blank  upon  the 
back  of  a  negotiable  note  before  delivery,  unless  he  clearly  indicates  by 
appropriate  words  his  intention  to  be  bound  in  some  other  capacity,  is 
liable  as  an  indorser  and  discharged  therefrom  upon  failure  of  notice  of 
non-payment  and  dishonor  at  maturity. 

Perry  Co.  v.  Taylor  Bros.,  148  N.  C.  362. 

Pleadings. — In  an  action  on  a  promissory  note,  an  allegation  that 
due  notice  of  protest  was  duly  given  to  the  defendants  and  each  of  them, 
is  equivalent  to  an  allegation  that  notice  of  presentment,  demand,  non- 
payment and  protest  was  given  to  the  defendants. 

Sherman  v.  Ecker,  59  Misc.  216. 

An  action  against  an  indorser  should  be  dismissed  where  the  com- 
plaint does  not  allege,  nor  the  proof  show,  notice  of  non-payment  to  the 
indorser,  such  want  of  notice  not  being  an  affirmative  defense  which 
must  be  set  up  by  the  defendant. 

Studebaker  v.  Tuerther,  123  N.  Y.  Supp.  118. 

The  complaint  must  allege  that  notice  of  dishonor  was  given,  other- 
wise it  is  demurrable. 

Ewald  v.  Faulhaber  Co.,  55  Misc.  275;  Scanlon  v.  Wallach,  53  Misc. 
104,  Bennett  v.  Kistler,  163  Supp.  555. 

In  an  action  upon  a  bank  check  it  is  not  necessary  that  the  complaint 
should  state  that  the  notice  of  dishonor  of  the  check  was  given  to  the 
drawer  in  a  case  where  the  drawer  stopped  payment  of  the  check. 

Scanlon  v.  Wallach,  53  Misc.  104;  Goodwin  v.  Cobe,  24  Misc.  389. 

But  where  the  pa>Tnent  of  the  check  was  not  stopped  and  the  com- 
plaint does  not  allege  notice  of  dishonor,  it  is  demurrable  for  insufficiency. 
Ewald  V.  Faulhaber,  55  Misc.  275. 

In  a  complaint  in  an  action  on  a  promissory  note  against  the  indorsers, 
an  allegation  of  notice  to  the  indorsers  of  presentment,  demand  and  non- 
payment is  necessary,  and  an  allegation  that  the  note  was  protested  for 
non-payment  is  not  equivalent  thereto. 

Sherman  V.  Enker,  58  Misc.  456;  Dan.  Neg.  Inst.  (5th  ed.)  Sec.  921; 
Jaffray  v.  Krauss,  70  Hun.  449;  Wisdom  v.  Bills,  120  La.  701. 

In  an  action  on  a  promissory  note,  an  allegation  that  due  notice  of 
protest  was  given  to  the  defendants  and  each  of  them,  is  eqmvalent  to  an 
allegation  that  notice  of  presentment,  demand,  non-payment  and  protest 
was  given  to  the  defendants. 

Sherman  v.  Ecker,  59  Misc.  216. 


NOTICE    OF   DISHONOB  247 

§  i6i.  By  whom  given.  The  notice  may  be  given  by  or 
on  behalf  of  the  holder,  or  by  or  on  behalf  of  any  party  to  the 
instrument  who  might  be  compelled  to  pay  it  to  the  holder, 
and  who,  upon  taking  it  up,  would  have  a  right  to  reimburse- 
ment from  the  party  to  whom  the  notice  is  given. 

It  is  not  necessary  that  notice  should  come  from  the  person  who  holds 
the  bill  when  it  was  dishonored,  and  it  snfficeth  if  it  be  given  after  the  bill 
was  dishonored  by  any  person  who  is  a  party  to  the  bill. 

West  River  Bank  v.  Taylor,  34  N.  Y.  131;  Chetty  on  Bills,  527. 

The  law  is  well  settled  that  a  demand  or  notice  to  be  effective  to  bind 
an  indorser,  or  discharge  the  maker  or  drawer  paying  to  the  person  making 
it,  must  be  by  one  having  real  or  ostensible  right  to  receive  payment. 

Hofrichter  v.  Enyhart,  99  N.  W.  (Neb.)  658;  West  River  Bank  v. 
Taylor,  34  N.  Y.  128. 

Notice  by  a  stranger  is  not  sufficient. 

Lawrence  v.  Miller,  16  N.  Y.  235;  Brailsford  v.  Williams,  15  Md. 
150;  Chanoine  v.  Fowler,  3  Wend.  173. 

Where  the  facts  relative  to  the  junior  indorser 's  efforts  to  ascertain 
the  address  of  the  prior  indorser  are  undisputed,  the  question  whether  he 
exercised  reasonable  diligence  is  a  question  of  law. 

University  Press  v.  Williams,  48  App.  Div.  188. 

As  to  banks  giving  notice,  see  Howard  v.  Ives,  1  Hill,  263;  Sheldon  v. 
Benham,  4  Hill  129. 

The  presenting  notary  may  give  notice. 

Smede  v.  Bank,  20  Johns,  372;  Dykman  v.  Northbridge,  1  App.  Div. 
(N.  Y.)  26. 

The  maker  of  a  note  cannot  give  a  valid  notice  of  protest  to  an  accom- 
modation indorser,  but  may  give  such  notice  on  behalf  of  a  bank  and  as 
its  agent. 

Traders'  National  Bank  v.  Jones,  104  App.  Div.  (N.  Y.)  436;  Cabot 
Bank  v.  Warner,  92  Mass.  522;  see  Sections  162,  163.  First  National 
Bank  v.  Gridley,  112  App.  Div.  (N.  Y.)  406. 

§  162.  Notice  given  by  agent.  Notice  of  dishonor  may 
be  given  by  an  agent  either  in  his  own  name  or  in  the  name  of 
any  party  entitled  to  give  notice,  whether  that  party  be  his 
principal  or  not. 

See  notes  Sections  161,  163. 

The  holder  of  a  promissory  note  is  presumed  to  know  the  person 
and  residence  of  his  immediate  indorser,  and  is  bound  to  communicate 


248  NEGOTIABLE   INSTRUMENTS   LAW 

his  information  to  any  agent  who  may  be  employed  to  charge  such  in- 
dorser  with  notice  of  non-payment. 

Lawrence  v.  Miller,  16  N.  Y.  235. 

The  agent  may  give  notice  in  his  own  name. 

Drexler  v.  McGlynn,  33  Pac.  (Cal.)  773. 

A  notice  by  a  notary  public  by  mistake  signed  with  the  name  of 
the  maker  instead  of  his  own  name,  without  authority  from  the  maker, 
is^insufficient. 

Cabot  Bank  v.  Warner,  92  Mass.  522. 

See  also,  Traders'  National  Bank  v.  Jones,  104  App.  Div.  N.  Y.  436; 
Lawrence  v.  Miller,  16  N.  Y.  238;  Smith  v.  Poillon,  87  N.  Y.  590;  Eagle 
Bank  v.  Hathaway,  46  Mass.  212;  First  National  Bank  v.  Gridley,  112 
App.  Div.  406. 

§  163.  Effect  of  notice  given  on  behalf  of  holder.  Where 
notice  is  given  by  or  on  behalf  of  the  holder,  it  inures  for  the 
benefit  of  all  subsequent  holders  and  all  prior  parties  who  have 
a  right  of  recourse  against  the  party  to  whom  it  is  given. 

The  duty  of  the  holder  of  a  promissory  note  is  discharged  by  notice 
to  his  immediate  indorser,  but  if  he  is  not  satisfied  with  the  responsibility 
of  such  indorser  he  should  give  notice  to  all  the  parties  to  whom  he  looks 
for  indemnity. 

West  River  Bank  v.  Taylor,  34  N.  Y.  128;  Linn  v.  Horton,  17  Wis. 
153;  Spencer  v.  Ballon,  18  N.  Y.  327;  Traders'  National  Bank  v.  Jones, 
104  App.  Div.  433. 

§  164.  Effect  where  notice  is  given  by  party  entitled 
thereto.  Where  notice  is  given  by  or  on  behalf  of  a  party 
entitled  to  give  notice,  it  inures  for  the  benefit  of  the  holder 
and  all  parties  subsequent  to  the  party  to  whom  notice  is  given. 

§  165.  When  agent  may  give  notice.  Where  the  instru- 
ment has  been  dishonored  in  the  hands  of  an  agent,  he  may 
either  himself  give  notice  to  the  parties  liable  thereon,  or  he 
may  give  notice  to  his  principal.  If  he  give  notice  to  his 
principal,  he  must  do  so  within  the  same  time  as  if  he  were 
the  holder,  and  the  principal  upon  the  receipt  of  such  notice 
has  himself  the  same  time  for  giving  notice  as  if  the  agent  had 
been  an  independent  holder. 


ISrOTICE    OF   DISHONOR 


249 


Unless  the  agent  gives  notice  to  his  principal  in  due  time  the  latter 
is  cut  off,  even  though  he  used  due  diligence  in  sending  notice  to  ante- 
cedent parties. 

Russon  V.  Carroll,  90  Tenn.  90. 

Where  the  plaintiffs,  indorsers  of  a  promissory  note,  deposited  the 
same  with  the  defendant  bank  for  collection,  and  the  bank  on  the  dishonor 
of  the  note,  not  knowing  the  address  of  the  prior  indorsers,  gave  due 
notice  of  dishonor  to  the  plaintiffs  and  enclosed  with  the  notice  to  them  a 
notice  of  dishonor  addressed  in  blank  to  the  indorser  and  bearing  a  two 
cent  postage  stamp,  which  latter  notice  the  plaintiffs  did  not  forward  to 
the  indorser:  as  the  bank  did  what  the  law  required  it  was  not  Hable  for 
negligence,  and  the  failure  of  plaintiffs  to  collect  from  the  prior  indorser 
was  due  to  their  own  negligence. 

Brill  V.  Jefferson  Bank,  159  App.  Div.  461. 

§  1 66.  When  notice  sufficient.  A  written  notice  need 
not  be  signed  and  an  insufficient  written  notice  may  be  sup- 
plemented and  validated  by  verbal  communication.  A  mis- 
description of  the  instnunent  does  not  vitiate  the  notice 
imless  the  party  to  whom  the  notice  is  given  is  in  fact  misled 
thereby. 

Variant. — The  Kentucky  statute  omits  the  word  "not"  and  substi- 
tutes the  word  "written"  for  "verbal"  in  the  first  sentence.  The  South 
Dakota  statute  omits  the  words  "the  notice"  in  the  last  sentence. 


For  case  imder  Kentucky  statute,  see  Grayson  Co.  Bank  v.  Elbert, 
143  Ky.  750. 

It  is  not  necessary  that  the  notice  of  dishonor  contain  a  written 
signature.  The  notary's  signature  may  be  printed,  as  it  fully  acquaints 
the  indorser  of  the  dishonor  of  the  note,  as  would  the  manuscript  signature 
of  a  person  whose  handwriting  he  did  not  know,  and  it  certainly  is  not 
expected  that  the  indorser  should  know  the  handwriting  of  the  notary. 

Bank  of  Cooperstown  v.  Woods,  28  N.  Y.  561. 

Inartificial  language,  accompanied  by  omission  to  give  the  date  of 
the  making  of  a  note,  the  date  of  its  maturity  and  the  name  of  the  payee, 
does  not  invalidate  a  notice  of  protest. 

Hermann  Co.  v.  Bjurstrom,  74  Misc.  93. 

Notice  of  dishonor  of  a  promissory  note  erroneously  addressed  on 
its  face  to  the  maker,  but  sent  by  mail  to  and  received  by  the  indorser, 
is  sufficient  in  the  absence  of  proof  that  the  indorser  was  misled  thereby. 


250  NEGOTIABLE   INSTRUMENTS   LAW 

Wilson  V.  Peck,  66  Misc.  179;  Marshall  v.  Sonneman,  215  Pa.  St.  65. 

A  notice  of  protest,  erroneous  in  some  particulars  in  the  description 
of  the  note  protested,  may  be  aided  by  evidence  that  there  was  no  other 
note  to  which  the  notice  could  be  applied. 

Cayuga  Coimty  Bank  v.  Warden,  6  N.  Y.  19;  Bank  v.  Litchfield, 
9  N.  Y.  279;  Second  National  Bank  v.  Smith,  94  N.  W.  Rep.  664. 

A  notice  of  non-payment  of  a  promissory  note,  not  stating  the  maker's 
name,  is  not  sufficient  to  charge  the  indorser. 

Home  Insurance  Co.  v.  Green,  19  N.  Y.  518. 

The  rule  appears  to  be  well  settled  that  where  a  negotiable  instrument 
has  been  permitted  to  go  to  protest,  and  the  holder  gives  a  notice  of  pro- 
test which  contains  a  misstatement  as  to  the  time  of  dishonor,  such 
mistake  invalidates  the  notice,  with  the  result  that  an  indorser  upon 
whom  the  defective  notice  is  served  will  not  be  bound  thereby.  But 
where  the  indorser  is  not  misled  by  a  mistake  in  the  notice  as  to  the  date 
of  the  dishonor,  such  mistake  will  not  have  the  effect  of  rendering  the 
notice  invalid  and  discharge  the  indorser,  as  for  example,  where  the 
mistake  is  apparent  from  the  face  of  the  notice,  it  being  handed  to  the 
indorser  before  the  date  stated  had  arrived. 

3  R.  C.  L.  1264;  Derham  v.  Donohue,  155  Fed.  385. 

See  also,  Wilson  v.  Peck,  121  N.  Y.  Supp.  344;  Marshall  v.  Sonneman, 
216  Pa.  St.  65;  64  Atl.  874;  Howard  v.  Von  Gieson,  46  App.  Div.  (N.  Y.) 
79;  Hodges  v.  Shuler,  22  N.  Y.  114,  119;  Artisans'  Bank  v.  Backus,  36 
N.  Y.  100,  107;  Northup  v.  Cheney,  27  App.  Div.  (N.  Y.)  421;  Mills  v. 
Bank  of  United  States,  11  Wheat.  431;  Gates  v.  Beecher,  60  N.  Y.  518; 
Carter  v.  Bradley,  19  Maine  62. 

§  167.  Form  of  notice.  The  notice  may  be  in  writing  or 
merely  oral  and  may  be  given  in  any  terms  which  sufficiently 
identify  the  instrument,  and  indicate  that  it  has  been  dis- 
honored by  non-acceptance  or  non-payment.  It  may  in  all 
cases  be  given  by  delivering  it  personally  or  through  the  mails. 

Variant. — The  Kentucky  statute  omits  the  words  "or  merely  oral." 


For  case  under  the  Kentucky  statute,  see  Grayson  Bank  v.  Albert, 
143  Ky.  753. 

While  no  precise  form  is  necessary  in  a  dishonor  of  a  promissory 
note,  yet  the  notice  must  reasonably  apprise  the  party  of  the  particvilar 
paper  upon  which  he  is  sought  to  be  charged.  The  note  should  be  de- 
scribed in  substance. 

I 


NOTICE   OF   DISHONOR  251 

Home  Insurance  Co.  v.  Green,  19  N.  Y.  518;  Derham  v.  Donohue, 
155  Fed.  385;  Brown  v.  Jones,  125  Ind.  375. 

It  is  not  necessary  that  the  notice  should  contain  a  formal  allegation 
that  the  payment  of  a  note  was  demanded  at  the  place  where  payable. 
It  is  sufficient  that  it  stated  the  fact  of  non-payment  and  that  the  holder 
looks  to  the  indorser  for  indemnity. 

Mills  V.  U.  S.  Bank,  11  Wheat.  (U.  S.)  431. 

A  notice  to  an  indorser  is  not  insufficient  although  it  does  not  state 
at  whose  request  it  was  given,  nor  who  is  the  holder.  It  is  of  no  conse- 
quence to  the  indorser,  who  is  the  holder,  as  he  is  equally  boimd  by  the 
notice,  whosoever  he  may  be,  and  it  is  time  enough  for  him  to  ascertain 
the  true  title  of  the  holder  when  he  is  called  upon  for  pa3rment.  Again, 
a  misnomer  of  the  indorser  in  the  notice  will  not  vitiate  it  if  in  fact  he 
knew  it  was  intended  for  him.  But  reasoning  that  the  most  striking 
feature  of  a  note  is  the  name  of  the  maker  it  has  been  held  that  a  notice 
of  dishonor  is  insufficient  if  it  fails  to  specify  the  maker's  name,  although 
it  states  the  date,  amoimt  and  time  of  maturity  of  the  instrument.  The 
notice  is  sufficient  if  signed  by  a  notary,  and  the  notary's  name  may  be 
printed  instead  of  being  affiD5;ed  by  him  in  his  own  handwriting.  Under 
this  section  no  signature  at  all  need  be  appended  to  the  notice. 

3  R.  C.  L.  1266;  Derham  v.  Donohue,  153  Fed.  386;  Home  Insurance 
Co.  V.  Green,  19  N.  Y.  518;  Fulton  v.  Maccracken,  18  Md.  528. 

Notice  to  an  indorser  may  contain  more  than  is  necessary,  and  more 
than  is  true,  and  yet  be  sufficient.  It  may  contain  less  than  the  whole 
truth,  that  is  less  than  what  an  exact  copy  of  the  note  if  sent  to  the  indorser 
would  give,  and  be  good.  This  must  necessarily  be  so,  from  the  principal 
of  law  that  no  form  of  notice  is  prescribed,  and  that  there  is  no  general 
rule  with  regard  to  the  notice  other  than  the  one  already  mentioned. 
Thus  the  omission  of  the  date  of  the  bill,  the  stating  of  a  false  date,  or  an 
inaccurate  statement  of  the  amoimt,  is  neither  of  them  of  course  fatal 
to  the  notice  as  has  been  repeatedly  held,  if  the  notice  be  otherwise  suffi- 
ciently full  to  give  the  needed  information. 

Gill  V.  Palmer,  29  Conn.  54;  Bank  of  Cooperstown  v.  Woods,  28 
N.  Y.  546;  Cayuga  Co.  Bank  v.  Warden,  6  N.  Y.  19;  Derham  v.  Donahue, 
155  Fed.  179. 

The  essential  facts  to  be  stated  in  a  notice  of  protest  to  bind  the 
indorser  are:  (1)  The  note  has  not  been  paid  at  maturity.  (2)  It  has 
been  protested  for  non-payment.     (3)  The  identification  of  the  note. 

Artisans'  Bank  v.  Backus,  36  N.  Y.  100;  Cayuga  Co.  Bank  v.  Warden, 
1  N.  Y.  413;  Cook  v.  Litchfield,  9  N.  Y.  280;  Second  National  Bank  v. 
Smith,  118  Wis.  19. 


252  NEGOTIABLE   INSTKUMENTS   LAW 

A  notice  of  dishonor  need  not  state  that  the  sender  looks  to  the 
indorser,  for  payment  as  it  may  be  inferred  that  the  holder  looks  to  the 
indorser  and  no  other  inference  could  reasonably  be  drawn  from  the 
notice. 

Nelson  v.  First  National  Bank,  69  Fed.  798;  Ransom  v.  Mack,  2 
Hill  (N.  Y.)  587. 

A  notice  of  protest,  dated  the  day  a  note  is  payable,  and  which  states 
the  names  of  the  maker  and  indorser,  and  the  amount,  is  sufficient  to 
charge  the  indorser,  imless  circimistances  exist  which  would  render  the 
information  it  was  designed  to  give  equivocal  and  uncertain. 

Bank  of  Cooperstown  v.  Woods,  28  N.  Y.  561;  Yotings  v.  Lee,  12 
N.  Y.  551. 

A  notice  of  non-payment  of  a  promissory  note,  not  stating  the  maker's 
name,  is  not  sufficient  to  charge  the  indorser. 

Home  Insurance  Co.  v.  Green,  19  N.  Y.  518. 

An  indorser 's  liability  to  recollect  whether  he  received  written  notice 
of  protest  does  not  overcome  the  positive  proof  that  such  notice  was 
written  and  mailed. 

Herrman  Lumber  Co.  v.  Bjurstrom,  74  Misc.  93. 
As  the  object  of  the  notice  is  always  to  give  information,  if  the  re- 
quired information  actually  reaches  the  party  to  be  notified,  it  is  sufficient 
however  it  may  be  communicated.  Hence,  whatever  mode  of  service 
of  notice  may  be  adopted,  if  the  notice  actually  comes  to  the  indorser  or 
drawer  in  due  season,  from  the  proper  quarter  and  in  proper  form,  it  is 
valid  and  effectual. 

3  R.  C.  L.  1257;  Monarch  Co.  v.  Farmers  and  Traders  Bank,  105 
Ky.  430;  49  S.  W.  317. 

Notice  may  be  given  by  telephone  if  it  be  clearly  shown  that  the 
party  to  be  notified  was  really  commtmicated  with,  that  is,  fully  identified, 
as  the  party  at  the  receiving  end  of  the  line. 

Bank  v.  Fertilizer,  125  Tenn.  329;  but  see  Mayer  v.  Boyle,  182  N.  Y. 
Supp.  729. 

A  notice  of  protest  signed  by  a  notary  pubHc,  and  personally  delivered 
by  him  to  the  indorser  is  not  sufficient  to  charge  the  latter,  where  it  ap- 
pears that  the  notice  was  addressed  to  another  person  than  the  indorser, 
and  stated  that  the  holder  looked  to  such  person  for  the  payment  of  the 
note. 

Marshall  v.  Sonneman,  216  Pa.  St.  65. 

Where  personal  service  of  a  notice  is  relied  upon,  the  evidence  must 
show  either  actual  personal  service  or  an  ordinarily  intelligent,  diligent 
effort  to  make  personal  service  upon  the  indorser,  either  at  his  place  of 
business  during  business  hours,  or  at  his  residence  if  he  has  no  place  of 


NOTICE    OF   DISHONOK  253 

business;  but  if  he  be  absent,  it  is  not  necessary  to  call  a  second  time, 
and  notice  may  in  that  event  be  left  with  any  one  found  in  charge,  or  no 
one  there,  then  the  giving  of  notice  is  deemed  to  be  waived. 

Am.  Exchange  National  Bank  v.  American  H.  V.  Co.,  103  App. 
Div.  (N.  Y.)  373;  Bank  of  Commonwealth  v.  Mudgett,  44  N.  Y.  514; 
N.  Y.  &  A.  Contracting  Co.  v.  Telma  Savings  Bank,  51  Ala.  305; 
Williams  v.  Bank  of  U.  S.,  2  Pet.  96;  Reed  v.  Spear,  107  App.  Div. 
(N.  Y.)  149. 

§  1 68.  To  whom  notice  may  be  given.  Notice  of  dis- 
honor may  be  given  either  to  the  party  himself  or  to  his  agent 
in  that  behalf. 

A  notice  of  protest  of  a  draft  may  be  served  upon  an  agent  of  the 
payee  and  indorser  of  the  draft,  where  the  agent  has  authority  to  make 
and  indorse  drafts,  and  has  authority  to  act  and  has  acted  as  general 
agent  of  the  payee. 

Pearsons  v.  Kruger,  45  App.  Div.  (N.  Y.)  187;  Scarborough  v.  City 
National  Bank,  157  Ala.  577;  48  S.  Rep.  62. 

Under  this  section  a  notice  of  protest  of  a  bill  of  exchange  indorsed 
by  a  bank  may  be  addressed  to  its  cashier. 

Coffman  v.  Bank  of  Kentucky,  41  Miss.  212;  90  Am.  Dec.  371. 

In  Union  Bank  v.  Stone,  50  Maine  595,  the  notary  testified  that  he 
was  in  the  habit  of  delivering  notices  to  S,  and  S  testified  that  he  was 
in  the  habit  of  delivering  notices  for  the  notary,  and  that  he  seasonably 
delivered  to  the  parties  to  be  notified  all  notices  handed  him  for  delivery, 
but  had  no  definite  recollections  of  doing  so  in  the  present  instance.  It 
was  held,  this  testimony  was  sufficient. 

McLean  v.  Ryan,  36  App.  Div.  (N.  Y.)  281;  New  Haven  Co.  Bank  v. 
Mitchell,  15  Conn.  206. 

An  incompleteness  or  inaccuracy  in  the  address  of  a  notice,  either  as 
to  person  or  place  addressed  will  be  immaterial  where  it  appears  in  evi- 
dence that  the  party  charged  actually  received  the  notice. 

Am.  and  Eng.  Ency.  of  Law,  416;  Carter  v.  Bradley,  36  Am.  Dec. 
(Me.)  735;  Glickman  v.  Earley,  78  Wis.  223. 

Cases  on  the  subject  generally,  see.  Am.  Exchange  Bank  v.  Am. 
H.  V.  Co.,  103  App.  Div.  372;  Reed  v.  Spear,  107  App.  Div.  149;  Mohlman 
V.  McKane,  60  App.  Div.  547;  Fassin  v.  Hubbard,  55  N.  Y.  471. 

§  169.  Notice  where  party  is  dead.  When  any  party  is 
dead,  and  his  death  is  known  to  the  party  giving  notice,  the 
notice  must  be  given  to  a  personal  representative,  if  there  be 


254  NEGOTIABLE   INSTRUMENTS   LAW 

one,  and  if  with  reasonable  diligence  he  can  be  found.  If 
there  be  no  personal  representative,  notice  may  be  sent  to 
the  last  residence  or  last  place  of  business  of  the  deceased. 

A  notice  of  non-payment  of  a  note  given  in  an  informal  way  to  an 
executor  of  a  deceased  indorser  after  a  delay  of  eleven  days,  and  to  his 
co-executor  to  whom  the  party  giving  such  notice  was  referred  only  after 
ten  additional  days  have  elapsed,  where  more  than  six  weeks  elapse  before 
a  formal  claim  is  presented  to  the  executors,  will  not  sustain  an  action  to 
enforce  the  liability  of  such  indorser  upon  the  note. 

Deininger  v.  Miller,  7  App.  Div.  (N.  Y.)  409. 

Notice  of  demand  and  non-payment  served  upon  one  of  several  execu- 
tors of  a  deceased  indorser  is  sufficient  to  bind  the  estate. 

Carolina  National  Bank  v.  Wallace,  13  S.  C.  347;  36  Am.  Rep.  694. 

It  has  been  held  that  if  notice  be  sent  to  the  last  residence  or  last 
place  of  business  of  the  deceased,  it  is  sufficient  to  render  his  estate  re- 
sponsible, as  it  may  reasonably  be  supposed  that  it  will  thus  reach  those 
interested  in  it. 

Goodnow  V.  Warren,  122  Mass.  82;  Merchants'  Bank  v.  Birch,  17 
Johns  25;  Linderman  v.  Guldin,  34  Pa.  St.  54. 

Where  an  indorser  of  a  note  has  died  and  the  holder  seeks  to  render 
his  estate  liable,  in  case  the  Surrogate's  Court  has  not  acquired  jurisdic- 
tion of  the  estate,  and  no  executor  or  administrator  has  been  appointed, 
it  is  still  the  duty  of  the  holder  to  use  all  reasonable  diHgence  in  order 
that  those  interested  in  the  estate  may  be  promptly  informed  of  the 
demand.  If  notice  be  sent  to  the  last  place  of  residence  or  place  of  busi- 
ness of  the  deceased,  it  is  sufficient  to  render  his  estate  liable,  as  it  may 
be  reasonably  supposed  that  it  will  reach  those  interested  in  it. 

Goodnow  v.  Warren,  122  Mass.  79;  Merchants'  Bank  v.  Birch,  17 
Johns  (N.  Y.)  25. 

Cases  on  the  subject  generally,  see  Mohlman  v.  McKane,  60  App. 
Div.  (N.  Y.)  546;  Merchants'  Bank  v.  Brown,  86  App.  Div.  599;  Reed  v. 
Spear,  107  App.  Div.  144;  Bank  of  Port  Jefferson  v.  Darling,  91  Hun.  236; 
Smally  v.  Wright,  40  N.  J.  Law  471. 

§  170.  Notice  to  partners.  Where  the  parties  to  be 
notified  are  partners  notice  to  any  one  partner  is  notice  to  the 
firm  even  though  there  has  been  a  dissolution. 

The  admission  by  one  of  two  partners  who  have  indorsed  a  draft  in 
the  name  of  the  firm,  that  the  draft  has  been  duly  protested  will  not,  if 
made  after  the  dissolution  of  the  partnership,  be  allowed  to  have  the 
effect  of  proving  notice  as  against  the  other  indorser. 


NOTICE    OF   DISHONOR 


255 


Bank  of  Vergennes  v.  Cameron,  7  Barb.  143. 

A  demand  of  payment  of  one  is  demand  of  all,  and  where  there  is  a 
dissolution  of  the  partnership  before  a  bill  falls  due  cannot  vary  the  rule, 
nor  render  it  necessary  that  a  separate  demand  should  be  made  of  each. 

Brown  v.  Turner,  15  Ala.  832;  Slocomb  v.  Lizardi,  2  La.  Am.  639 
Gates  V.  Beecher,  60  N.  Y.  518;  Seldner  v.  Mt.  Jackson  Bank,  66  Md.  488 
Darling  v.  March,  22  Maine  184;  Kershaw  v.  Kelsey,  100  Mass.  561 
Fiegenspan  v.  McDonnell,  201  Mass.  341;  Bank  of  St.  Loms  v.  Altheimer, 
91  Mo.  191. 

The  service  of  notice  upon  an  agent  employed  in  liquidating  the 
affairs  of  a  partnership  firm  is  good  service,  as  such  notice  relates  to 
those  affairs. 

Fassin  v.  Hubbard,  55  N.  Y.  471. 

In  Traders'  National  Bank  v.  Jones,  104  App.  Div.  (N.  Y.),it  was 
held,  that  a  notice  served  upon  the  firm  of  which  Jones  was  a  member, 
had  the  plaintiff  alleged  that  Jones  was  such  member,  would  alone  be 
sufficient  to  charge  Jones  with  the  liability  as  indorser. 

Gowan  v.  Jackson,  20  Johns  176. 

One  who  indorses  a  promissory  note  in  the  name  of  a  firm,  cannot 
deny  the  existence  of  the  firm  in  order  to  protect  himself  from  liability. 

Hubbard  v.  Matthews,  54  N.  Y.  43. 

There  is  a  distinction  between  the  case  of  a  note  of  joint  makers  who 
are  not  partners  and  a  note  of  partners.  That  distinction  rests  upon  the 
fact  that  partners  are  but  one  person,  in  legal  contemplation;  that  each 
partner,  acting  in  such  capacity,  is  not  only  capable  of  performing  what  all 
can  do,  and  such  acts  necessarily  bind  them  all,  and  all  the  partners  are 
affected  by  the  knowledge  of  one.  These  things  do  not  apply  to  the 
relations  of  joint  makers  who  are  not  partners.  Hence  a  demand  of  one 
partner  is  eqmvalent  to  a  demand  of  all;  a  demand  of  one  of  joint  makers, 
not  partners,  is  not. 

Gates  V.  Beecher,  60  N.  Y.  523;  Major  v.  Hawks,  12  111.  298;  see 
Sec.  171. 

It  has  been  held  that  if  one  of  the  members  of  the  partnership  resides 
at  a  distance  and  another  at  the  place  of  residence  of  the  party  giving 
notice,  notice  shoiild  be  given  to  the  latter  partner. 

Himie  V.  Watt,  5  Kan.  34. 

Cases  on  the  subject  generally,  see  Rhett  v.  Poe,  2  How.  (U.  S.)  457; 
Gowan  v.  Jackson,  20  Johns  176;  Hubbard  v.  Matthews,  54  N.  Y.  43; 
Citizens  Bank  v.  Hays,  96  Ky.  365;  St.  Louis  National  Bank  v.  Altheimer, 
91  Mo.  190. 


256  NEGOTIABLE    INSTRUMENTS   LAW 

§  171.  Notice  to  persons  jointly  liable.  Notice  to  joint 
parties  who  are  not  partners  must  be  given  to  each  of  them, 
unless  one  of  them  has  authority  to  receive  such  notice  for 
the  others. 

Distinction  between  parties  jointly  liable  and  partners,  see  Notes, 
Sec.  170;  Gates  v.  Beecher,  60  N.  Y.  523. 

Where  persons  not  partners  indorse,  each  are  entitled  to  notice,  and 
upon  failure  to  give  such  notice  neither  could  be  charged,  because  as  to 
them  each  must  have  separate  notice,  and  neither  is  liable  without  the 
other  is  so  charged. 

Willis  V.  Green,  5  Hill  232;  Shepard  v.  Hamley,  1  Conn.  367;  Hub- 
bard V.  Matthews,  54  N.  Y.  50;  Boyd  v.  Horton,  16  Wis.  495;  but  see, 
Jamagin  v.  Stratton,  95  Tenn.  619;  Williams  v.  Paintsville  Bank,  143 
Ky.  781;  137  S.  W.  535. 

§  172.  Notice  to  bankrupt.  Where  a  party  has  been 
adjudged  a  bankrupt  or  an  insolvent,  or  has  made  an  assign- 
ment for  the  benefit  of  creditors,  notice  may  be  given  either 
to  the  party  himself  or  to  his  trustee  or  assignee. 

In  Callahan  v.  Bank  of  Kentucky,  82  Ky.  231,  in  discussion  of  this 
subject  the  court  said:  "The  question  has  been  heretofore  undetermined 
in  this  state,  and  we  are  at  liberty  therefore  to  estabHsh  that  rule  which  is 
in  most  accord  with  what  we  conceive  to  be  the  weight  of  authority  and 
reason.  We  are  satisfied,  therefore,  to  hold  the  law  to  be  that,  whenever 
a  general  assignment  is  made,  as  contemplated  by  our  law,  the  assignee  in 
such  assignment  so  far  stands  in  the  shoes  of  his  assignor  that  notice  to 
such  assignee  of  the  non-payment  of  the  indorsed  paper  will  bind  the 
indorser." 

American  National  Bank  v.  Junk,  94  Tenn.  624;  Casco  Bank  v.  Shaw, 
79  Me.  376. 

Due  notice  of  non-payment  is  not  excused,  because  the  maker  of  a 
note  was  insolvent  or  bankrupt  when  the  note  was  made  and  indorsed,  and 
also  when  it  fell  due,  although  the  fact  was  known  to  the  indorser.  This 
demand  and  notice  the  indorser  has  a  right,  in  all  cases,  to  insist  upon; 
for  this  reason,  that,  upon  payment  by  him,  he  may  have  his  remedy  over 
against  the  maker.  And  although  the  insolvency  of  the  maker  renders 
his  remedy  less  valuable,  it  does  not  necessarily  render  it  worthless.  There 
are  various  degrees  of  insolvency,  and  it  rarely  happens  that  a  man  is 
totally  insolvent,  so  that  there  is  a  chance  of  getting  something  by  an 
appUcation  to  the  debtor.     Besides,  if  a  man  has  nothing  of  his  own  he 


NOTICE    OF   DISHONOR 


257 


may  have  friends  who,  to  relieve  him  from  pressure,  will  do  something 
for  him.  The  indorser  therefore  has  a  chance  of  securing  himself  at  least 
in  part.  The  only  reason  that  can  be  assigned  for  insolvency  taking  away 
the  necessity  of  notice  is  that  notice  could  be  of  no  use  to  the  indorser. 
But  it  is  almost  impossible  to  prove  that  it  might  not  have  been  of  use. 

PhilHps  V.  Harding,  70  Fed.  468;  Leonard  v.  Olson,  98  la.  162;  Farnum 
V.  Fowle,  12  Mass.  89;  Cook  v.  American  Tube  Co.,  28  R.  I.  41 ;  3  R.  C.  L. 
1234. 

Insolvency  of  a  maker  is  no  excuse  for  failure  to  notify  the  indorser 
of  its  dishonor. 

Manning  v.  Lyon,  70  Hunn.  345;  Meise  v.  Newman,  98  Hun.  428. 

If  the  maker  of  a  note  becomes  insolvent  and  is  adjudged  a  bankrupt, 
the  payee  should  present  his  claim  in  the  bankrupt's  estate  and  if  he  fails 
to  do  so,  the  indorsers  are  released,  but  only  to  the  extent  to  which  they 
suffer  because  of  such  failure,  and  a  recovery  may  be  had  against  them  for 
the  amount  which  would  have  remained  unpaid  had  the  claim  been  pre- 
sented in  bankruptcy  and  a  dividend  been  allowed  and  received  thereon. 

Second  National  Bank  v.  Prewitt,  117  Tenn.  1 ;  9  L.  R.  A.  581. 

§  173.  Time  within  which  notice  must  be  given.  Notice 
may  be  given  as  soon  as  the  instriunent  is  dishonored;  and 
unless  delay  is  excused  as  hereinafter  provided,  must  be  given 
within  the  times  fixed  by  this  chapter. 

The  maker  of  a  promissory  note  has  until  the  close  of  the  banking 
hours,  of  the  bank  where  the  note  is  payable,  in  which  to  pay  it,  and  if 
before  the  close  of  banking  hours  he  deposits  money  in  the  bank  sufficient 
to  cover  the  note,  demands  of  payment  (made  by  the  holder)  earlier  on 
the  same  day  are  premature.  He  cannot  thereafter  be  lawfully  charged 
with  fees  of  protest  made  before  the  close  of  banking  hours,  nor  with  in- 
terest after  maturity  where  the  account  was  kept  good  until  action  brought 
and  he  thereafter  immediately  paid  the  amoimt  into  court  and  pleaded 
tender,  nor  is  he  chargeable  with  costs  of  the  action. 

German  American  Bank  v.  Milliman,  31  Misc.  87;  Etheridge  v.  Ladd, 
44  Barb.  69;  Merchants'  Bank  v.  Elderkin,  25  N.  Y.  178;  Osbom  v. 
Rogers,  112  N.  Y.  573;  Planters'  Bank  v.  Markham,  6  Miss.  397;  Mills 
V.  Bank  of  United  States,  11  Wheat.  431. 

The  holder  of  a  bill  or  note  is  entitled  to  give  notice  of  dishonor  im- 
mediately upon  demand  and  non-payment.  If  the  instrument  is  due  at 
any  hour  upon  the  day  of  maturity,  the  holder  may  present  it  for  payment 
and  give  notice  of  dishonor  forthwith.  But  where  the  maker  is  entitled 
to  the  whole  day  in  which  to  make  payment,  the  notice  should  not  be 
given  until  the  conclusion  of  business  hours.     If  an  indorser  receives  notice 


258  NEGOTIABLE   INSTRUMENTS   LAW 

in  due  season  that  the  note  has  been  duly  presented  for  payment  and 
protested,  the  purpose  of  the  law  has  been  accomplished,  although  the 
holder  of  the  note  has  not  complied  with  one  of  the  essential  rules  in  regard 
to  use  of  diligence  in  giving  notice. 

While  the  authorities  are  not  agreed  upon  the  proposition,  it  is  held 
by  the  weight  of  authority,  that  the  same  diligence  must  be  used  in  giving 
notice  of  dishonor  to  the  indorser  of  overdue  note  as  is  required  by  the  law 
merchant  is  notifying  one  who  indorses  before  maturity. 

3  L.  C.  L.  1246;  King  v.  Crowall,  61  Mo.  244;  Oakley  v.  Carr,  66  Neb. 
751;  92  N.  W.  1000;  Stanley  v.  McElrath,  86  Cal.  449;  10  L.  R.  A.  545; 
Rosson  v.  Carroll,  90  Tenn.  90;  12  L.  R.  A.  727. 

§  174.  Where  parties  reside  in  same  place.  Where  the 
person  giving  and  the  person  to  receive  notice  reside  in  the 
same  place,  notice  must  be  given  within  the  following  times: 

1 .  If  given  at  the  place  of  business  of  the  person  to  receive 
notice,  it  must  be  given  before  the  close  of  business  hours  on 
the  day  following; 

2.  If  given  at  his  residence,  it  must  be  given  before  the 
usual  hours  of  rest  on  the  day  following; 

3.  If  sent  by  mail,  it  must  be  deposited  in  the  post-office 
in  time  to  reach  him  in  usual  course  on  the  day  following. 

Variant. — The  Rhode  Island  statute  amends  subd.  2  to  read:  "2. 
If  given  at  his  residence  it  must  be  given  before  ten  o'clock  in  the  evening 
of  the  day  following." 


Subd.  I. — Service  at  the  place  of  business  must  be  made  during 
business  hours,  but  service  at  the  residence  will  be  sufficient  if  made  during 
any  hours  when  members  of  the  household  are  attending  to  their  ordinary 
affairs. 

Adams  v.  Wright,  14  Wis.  409. 

See  also,  Rosson  v.  Carroll,  90  Tenn.  90;  Graul  v.  Strutzel,  53  la.  712; 
Bank  v.  Ezell,  10  Hun.  386;  Patterson  v.  Todd,  18  Pa.  St.  426;  Cayuga 
Coimty  Bank  v.  Hunt,  2  Hill  237;  Dan.  Neg.  Insts.,  Section  1038. 

Subd.  2.— See  Adams  v.  Wright,  14  Wis.  409. 

Subd.  3. — ^Where  the  notary  certifies  that  a  notice  of  protest  was 
mailed  to  an  indorser  in  care  of  plaintiff,  and  there  is  no  evidence  that  the 
defendant  was  at  plaintiff's  address,  and  the  notice  does  not  contain  the 
reputed  address  of  the  defendant,  and  any  presumption  of  diligence  in 


NOTICE    OF   DISHONOR 


259 


obtaining  and  mailing  notice  to  the  defendant  is  rebutted  by  the  fact  that 
three  days  after  the  protest  she  received  notice  mailed  to  her  the  day 
before  its  receipt. 

Siegel  V.  Dubinsky,  56  Misc.  683. 

A  notice  placed  in  a  mail  chute  under  the  control  of  the  postoffice 
department  in  the  City  of  New  York  on  the  day  of  protest  and  postmarked 
the  following  day  at  noon  will  be  prestimed  to  have  been  delivered  before 
the  close  of  business  on  the  day  last  mentioned,  as  required  by  this  section. 

Wilson  V.  Peck,  66  Misc.  179. 

Where  the  holder  does  not  actually  know  the  indorser's  place  of 
residence,  the  notice  may  be  addressed  to  the  place  where,  after  diligent 
inquiry,  he  is  informed  and  believes  he  resides. 

Requa  v.  Collins,  51  N.  Y.  147;  University  Press  v.  Williams,  48  App. 
Div.  196. 

§  175.  Where  parties  reside  in  different  places.  Where 
the  person  giving  and  the  person  to  receive  notice  reside  in 
different  places,  the  notice  must  be  given  within  the  following 
times: 

1.  If  sent  by  mail,  it  must  be  deposited  in  the  post-ofifice 
in  time  to  go  by  mail  the  day  following  the  day  of  dishonor, 
or  if  there  be  no  mail  at  a  convenient  hour  on  that  day,  by  the 
next  mail  thereafter. 

2.  If  given  otherwise  than  through  the  post-office,  then 
within  the  time  that  notice  would  have  been  received  in  due 
course  of  mail,  if  it  had  been  deposited  in  the  post-ofhce 
within  the  time  specified  in  the  last  subdivision. 

Whitewell  v.  Johnson,  17  Mass.  449;  Chick  v.  Pillsbury,  24  Me.  458; 
Sewall  V.  Russell,  3  Wend.  276;  Sussex  Bank  v.  Baldwin,  2  Harrison 
(N.  J.)  487;  Burgess  v.  Vreeland,  24  N.  J.  L.  71;  Lawson  v.  Farmers' 
Bank,  1  Ohio  St.  206;  Freeman's  Bank  v.  Perkins,  18  Me.  292. 

These  authorities,  while  not  entirely  harmonious,  undoubtedly  tend 
to  sustain  the  rule  that  the  notice  must  be  sent  on  the  next  day  by  the  first 
practical  and  convenient  post. 

In  Smith  v.  Poillon,  87  N.  Y.  597,  the  court  said:  "From  a  careful 
examination  of  the  above  authorities  it  is  clear  that  the  law  is  not  precisely 
settled.  It  appears  that  at  first  it  was  supposed  to  be  necessary  that  a 
notice  of  dishonor  should  be  given  by  the  next  post  after  dishonor,  on  the 
same  day,  if  there  was  one.     That  rule  was  found  inconveniently  stringent, 


260  liTEGOTIABLE   INSTRUMENTS    LAW 

and  then  it  was  held  that  when  the  parties  lived  in  different  places  between 
which  there  was  a  mail,  the  notice  could  be  posted  the  next  day  after  the 
dishonor  or  notice  of  dishonor.  Some  of  the  authorities  hold  that  the 
party  required  to  give  the  notice  may  have  the  whole  of  the  next  day. 
Some  of  them  hold  that  when  there  are  several  mails  on  the  next  day,  it  is 
sufficient  to  send  the  notice  by  any  post  of  that  day.  Other  authorities 
lay  down  the  rule,  in  general  terms,  that  the  notice  must  be  posted  by  the 
first  practical  and  convenient  mail  of  the  next  day;  and  that  rule  seems 
to  be  supported  by  most  authorities  in  this  state.  What  is  practical  and 
convenient  mail  depends  upon  circumstances.  It  may  be  controlled  by 
the  usages  of  business  and  the  custom  of  the  people  at  the  place  of  mailing, 
and  the  condition,  situation  and  business  engagements  of  the  person 
required  to  give  the  notice.  The  rule  should  have  a  reasonable  application 
in  every  case." 

Notice  of  dishonor  of  a  bank  check  given  by  telegraph  on  the  second 
day  following  the  deposit  of  the  check  for  collection  and  immediately  after 
the  depositor  received  notice  of  such  dishonor  is  good,  for  imder  this  section 
and  Section  174,  the  bank  had  until  the  day  following  to  give  notice  of 
dishonor,  and  by  virtue  of  Section  178  the  depositor  had  until  the  day 
following  notice  to  him  within  which  to  notify  antecedent  parties. 

Jurgens  v.  Wichmann,  124  App.  Div.  (N.  Y.)  531. 

Notice  of  dishonor  is  too  late,  where  the  notice  with  insufficient 
postage  was  deposited  in  the  postoffice  after  ordinary  business  hours  and 
the  closing  of  mail  on  the  business  day  succeeding  dishonor,  and  was  not 
again  sent  with  sufficient  postage  imtil  five  days  after  its  return  by  the 
postal  authorities. 

First  National  Bank  v.  Miller,  139  Wis.  126. 

The  general  rule  that  notice  of  dishonor  may  be  sent  by  mail  to  a 
drawer  or  indorser  who  resides  in  a  different  city  or  town  from  that  in 
which  the  holder  resides,  is  foimded  on  the  universal  usage  of  all  persons 
engaged  in  commercial  and  other  business  transactions  to  resort  to  the 
public  post  as  a  safe  and  certain  medium  of  commimication  between  places 
from  and  to  which  there  is  a  regular  transmission  of  the  mail.  If  such 
were  not  the  nile,  and  if  it  was  necessary  in  order  to  charge  a  drawer  or 
indorser  either  to  give  him  personal  notice  of  the  dishonor  of  a  bill  or  note, 
or  to  leave  a  notice  at  the  place  of  his  domicile,  it  is  obvious  that  in  may 
cases  a  very  serious  burden  woiild  be  put  on  the  holder  of  negotiable  paper, 
and  its  free  circulation  beyond  the  limits  of  the  domicile  of  the  parties  would 
become  almost  impracticable. 

Shaylor  v.  Mix,  4  Allen  (Mass.)  351. 

The  subject  generally,  see,  Strubbe  v.  Kings  Co.  Trust  Co.,  60  App. 
Div.  (N.  Y.)  549. 


NOTICE    OF   DISHONOR  261 

§  176.  When  sender  deemed  to  have  given  due  notice. 

Where  notice  of  dishonor  is  duly  addressed  and  deposited 
in  the  post-office,  the  sender  is  deemed  to  have  given  due 
notice,  notwithstanding  any  miscarriage  in  the  mails. 

This  section  should  be  construed  in  connection  with  section  179 
specifying  "where  notice  must  be  sent." 

It  is  a  defense  to  an  action  against  the  indorser  of  a  promissory  note 
that  notice  of  protest,  mailed  to  him  at  a  place  he  did  not  live  and  not  at 
his  last  known  address,  was  not  received  by  him  until  many  months  after 
the  note  had  been  protested,  and  that  plaintiff  did  not  use  reasonable 
diligence  to  ascertain  defendant's  address. 

Albany  Trust  Co.,  70  Misc.  598. 

Proof  of  the  non-receipt  of  the  notice  was  competent  on  the  question 
of  whether  there  had  ever  been  an  actual  mailing.  Such  proof  would  con- 
stitute a  circttmstance  in  which  the  proof  as  to  the  mailing  was  to  be 
weighed  and  considered. 

Union  Bank  v.  Deshel,  139  App.  Div.  (N.  Y.)  219. 

Where  the  evidence  shows  that  a  notice  of  dishonor  of  a  promissory 
note,  sent  to  an  address  other  than  the  one  written  by  the  indorser  upon 
the  note,  was  never  received  by  the  indorser,  the  notice  was  not  "duly 
addressed"  within  the  meaning  of  this  section,  and  the  indorser  is  entitled 
to  judgment  in  her  favor. 

Centvu-y  Bank  v.  Breitbart,  89  Misc.  308;  Feigenspan  v.  McDonnell, 
201  Mass.  341. 

Where  a  notice  of  dishonor  is  mailed  as  required  by  law,  the  fact  that 
it  is  not  received  is  immaterial. 

Board  of  Education  v.  Angel,  84  S.  E.  Rep.  747. 

A  notice  of  protest  signed  by  a  notary  public  and  personally  delivered 
by  him  to  the  indorser  is  not  sufficient  to  charge  the  latter,  where  it  appears 
that  the  notice  was  addressed  to  another  person  than  the  indorser,  and 
stated  that  the  holder  looked  to  such  person  for  the  payment  of  the  note. 

Marshall  v.  Sonneman,  216  Pa.  St.  65. 

A  notice  is  not  on  time  where  it  is  deposited  with  insufficient  postage 
in  the  postoffice  after  ordinary  business  ho\irs  and  after  the  close  of  mail 
on  the  first  secular  day  following  dishonor,  and  being  returned  by  the  postal 
authorities,  is  not  again  mailed  with  sufficient  postage  until  five  days 
thereafter. 

Bank  of  Shawano  v.  Miller,  139  Wis.  126;  120  N.  W.  820. 

The  burden  of  proof  rests  upon  plaintiff  to  show  a  compliance  with 
the  statutory  provisions  in  order  to  hold  the  indorser,  as  the  liability  of 
the  indorser  depends  entirely  upon  compliance  as  to  notice. 


262  NEGOTIABLE   INSTRUMENTS   LAW 

Bank  v.  Zimmerman,  185  N.  Y.  210;  Robinson  v.  Aird,  43  Fla.  30^ 
Bank  v.  Pezolat,  95  Mo.  App.  404,  69  S.  W.  51;  Bank  v.  Watch  Case  Co., 
187  Mich.  226. 

For  cases  on  the  subject  generally,  see,  Du  Pont  Powder  Co.  v.  Rooney,. 
63  Misc.  344;  Cuming  v.  Roderick,  28  App.  Div.  (N.  Y.)  253;  Siegel  v. 
Dubinsky,  56  Misc.  681;  Bartlett  v.  Robinson,  39  N.  Y.  187;  Howard  v. 
Van  Gieson,  46  App.  Div.  77;  University  Press  v.  Williams,  48  App.  Div. 
189;  State  Bank  v.  Solomon,  84  N.  Y.  Supp.  976;  Requa  v.  Collins,  51 
N.  Y.  145;  Vogel  v.  Starr,  132  Mo.  App.  430;  Bacon  v.  Hanna,  137  N.  Y. 
382;  Pier  v.  Heinrichshoffen,  67  Mo.  163;  Nolly  v.  Lyons,  117  111.  244; 
Carter  v.  Bradley,  19  Me.  62;  Marshall  v.  Sonneman,  216  Pa.  St.  65. 

§  177.  Deposit  in  post-office;  what  constitutes.  Notice 
is  deemed  to  have  been  deposited  in  the  post-office  when 
deposited  in  any  branch  post-office  or  in  any  letter  box  under 
the  control  of  the  post-office  department. 

Delivery  to  a  mail  carrier  while  making  his  rounds  has  been  held  a 
deposit  within  the  meaning  of  the  section. 

Pearce  v.  Langfit,  101  Pa.  507;  Wynen  v.  Schappert,  6  Daly  558. 

A  mail  chute  is  a  letter  box  imder  the  control  of  the  postoffice  depart- 
ment, and  therefore  eqmvalent  to  the  postoffice  itself. 

Wilson  V.  Peck,  66  Misc.  180;  Casco  National  Bank  v.  Shaw,  79  Me. 
376,  Atl.  67. 

The  deposit  of  a  notice  of  dishonor  of  negotiable  paper  in  a  private 
letter  box  of  a  private  office  is  not  a  deposit  as  required  by  this  section. 

Townsend  v.  Auld,  10  Misc,  343. 

Where  notice  was  deposited  in  a  letter  box  in  the  bank  from  which 
the  mail  was  accustomed  to  be  collected  by  the  mail  carrier,  it  might  be 
inferred  in  the  absence  of  any  evidence  to  the  contrary  that  the  notice  had 
been  sent. 

Central  National  Bank  v.  Stoddard,  83  Conn.  339;  Hastings  v.  Brookly 
L.  I.  Co.,  138  N.  Y.  473,  478;  Whitney  v.  Moore,  61  Vt.  230;  17  Atl.  1007. 

For  cases  on  the  subject  generally,  see.  Bank  v.  Shaw,  79  Me.  376; 
Johnson  v.  Brown,  154  Mass.  106;  Casco  Bank  v.  Shaw,  79  Me.  376;  Wood 
V.  Callahan,  61  Mich.  402. 

§  178.  Notice  to  antecedent  party;  time  of.  Where  a 
party  receives  notice  of  dishonor,  he  has,  after  the  receipt  of 
such  notice,  the  same  time  for  giving  notice  to  antecedent 
parties  that  the  holder  has  after  the  dishonor. 

The  holder  may  give  notice  of  dishonor  to  the  indorser  to  whom  he 
desires  to  look  for  the  payment  of  the  money,  and  it  is  then  incumbent 


NOTICE    OF   DISHONOR  263 

upon  him  within  the  time  specified  after  he  receives  the  notice  from  the 
holder  to  give  notice  to  those  to  whom  he  may  wish  to  look  for  reimburse- 
ment. The  operation  of  this  section  is  not  confined  to  those  who  are 
antecedent  in  liability  as  to  the  whole  of  the  debt ;  but  it  applies  to  all  who 
are  antecedent  as  to  any  part  of  it.  The  indorsers  known  their  relation 
to  each  other  better  than  the  holder,  and  the  purpose  of  the  act  is  to 
provide  a  uniform  rule  which  the  holder  may  follow  in  all  cases  as  the  rule 
was  applied  in  the  case  of  successive  indorsers  at  common  law. 

Williams  v.  Bank,  143  Ky.  781,  137  S.  W.  535;  Eaves  v.  Keeton,  103 
S.  W.  (Mo.)  632. 

Service  of  notice  upon  an  antecedent  party  is  not  shown  by  the  mere 
testimony  of  the  notary  that,  not  knowing  the  address  of  the  indorser,  he 
enclosed  the  notice  of  dishonor  to  a  subsequent  indorser  with  postage  for 
forwarding  the  same  to  the  prior  indorser. 

Fuller  Buggy  Co.  v.  Waldron,  112  App.  Div.  814. 

Where  the  last  indorser  of  a  promissory  note  received  notice  of  dis- 
honor on  Saturday,  his  notice  to  the  next  prior  indorser  is  timely  if  served 
on  the  following  Monday. 

Oakley  v.  Carr,  92  N.  Y.  (Neb.)  1000,  60  L.  R.  A.  431. 

Notice  of  dishonor  of  a  bank  check  given  by  telegraph  on  the  second 
day  following  the  deposit  of  a  check  for  collection  and  immediately  after 
the  depositor  received  notice  of  such  dishonor  is  good,  for  under  Sections 
174  and  175  the  bank  had  tmtil  the  day  following  to  give  notice  of  dishonor, 
and  by  virtue  of  this  section  the  depositor  had  imtil  the  day  following 
notice  to  him  within  which  to  notify  antecedent  parties. 

Jurgens  v.  Wichmann,  124  App.  Div.  531. 

Cases  on  the  section  generally,  see,  Shelbume  National  Bank  v. 
Townsley,  102  Mass.  177;  Rosson  v.  Carroll,  90  Tenn.  90,  16  S.  W.  66,  12 
L.  R.  A.  727;  Stephenson  v.  Dickson,  24  Pa.  St.  148;  Williams  v.  Bank, 
143  Ky.  787;  Shea  v.  Vahney,  215  Mass.  80. 

§  179.  Where  notice  must  be  sent.  Where  a  party  has 
added  an  address  to  his  signature,  notice  of  dishonor  must  be 
sent  to  that  address;  but  if  he  has  not  given  such  address, 
then  the  notice  must  be  sent  as  follows: 

1.  Either  to  the  post-oflfice  nearest  to  his  place  of  resi- 
dence, or  to  the  post-office  where  he  is  accustomed  to  receive 
his  letters;  or 

2.  If  he  live  in  one  place,  and  have  his  place  of  business 
in  another,  notice  may  be  sent  to  either  place;  or 


264  NEGOTIABLE   INSTRUMENTS   LAW 

3.  If  he  is  sojourning  in  another  place,  notice  may  be  sent 
to  the  place  where  he  is  so  sojourning. 

But  where  the  notice  is  actually  received  by  the  party 
within  the  time  specified  in  this  chapter,  it  will  be  sufficient, 
though  not  sent  in  accordance  with  the  requirements  of  this 
section. 

If  the  holder  goes  further  and  attempts  to  add  a  particular  address,  he 
takes  the  risk  that  the  address  so  given  may  be  wrong,  in  which  event  the 
statute  gives  him  no  protection.  McGrath  v.  Matilda  Francolini,  Emil 
Mayer,  et  al.,  156  N.  Y.  Supp.  980;  Du  Pont  de  Nemour  Powder  Co.  v. 
Rooney,  63  Misc.  Rep.  744,  117  N.  Y.  Supp.  220;  Ebling  Brewing  Co.  v. 
Reinheimer,  32  Misc.  Rep.  594,  66  N.  Y.  Supp.  458;  Webber  v.  Gotthold, 
8  Misc.  Rep.  503,  28  N.  Y.  Supp.  763;  and  perhaps  also  Cuming  v.  Rod- 
erick, 28  App.  Div.  253,  50  N.  Y.  Supp.  1053;  Id.,  42  App.  Div.  620,  58 
N.  Y.  Supp.  1093;  Id.,  167  N.  Y.  571,  60  N.  E.  1109. 

Subd.  I. — The  term  residence  as  used  in  this  section  is  not  used  in 
strict  sense  as  necessarily  implying  a  permanent,  exclusive  or  actual  abode 
in  the  place,  but  it  may  be  satisfied  by  a  temporary,  partial  or  even  con- 
structive residence. 

Wachusett  National  Bank  v.  Fairbrother,  148  Mass.  181. 

The  holder  cannot  rely  upon  the  fact  that  the  indorser's  address  is 
given  in  the  directory  as  his  place  of  residence. 

McGrath  v.  FrancoHni,  92  Misc.  359. 

Where  the  indorser  of  a  note,  residing  in  New  York  City,  does  not 
add  his  address  to  his  signature,  a  notice  of  dishonor  mailed  to  him  ad- 
dressed "New  York  City,"  is  sufficient,  though  the  notice  is  not  received 
by  the  indorser.  If  the  holder  goes  further  and  attempts  to  add  a  particular 
address,  he  takes  the  risk  that  the  address  so  chosen  may  be  wrong,  in 
which  event  the  statute  gives  him  no  protection. 

McGrath  v.  FrancoHni,  92  Misc.  364,  156  N.  Y.  Supp.  980;  Webber 
V.  Gotthold,  8  Misc.  503.  See  also,  Mohlman  v.  McKane,  60  App. 
Div.  546. 

Notice  mailed  to  an  indorser  of  a  note,  directed  to  the  city  in  which 
he  has  a  place  of  business  meets  the  requirements  of  this  section. 

Hussey  v.  Sutton,  96  Misc.  552. 

The  statute  is  mandatory.  It  provides  that  where  the  indorser  has 
not  added  his  address  to  his  signature,  the  notice  "must"  be  sent  to  the 
postoffice  nearest  to  his  place  of  residence  or  to  the  postoffice  where  he  is 
accustomed  to  receive  his  letters.  In  such  a  case  the  burden  is  on  the 
holder  of  the  note  to  discover  the  "place  of  residence"  and  to  send  the 


NOTICE    OF   DISHONOR 


265 


notice  to  the  nearest  postoffice.  This  appears  to  be  the  measure  of 
"diligence"  required  by  law  (Cuming  v.  Roderick,  28  App.  Div.  253,  256, 
50  N.  Y.  Supp.  1053),  but  if  the  holder  goes  further  and  attempts  to  add  a 
particular  address,  he  takes  the  risk  that  the  address  so  chosen  may  be 
wrong,  in  which  event  the  statute  gives  him  no  protection  (Du  Pont  Co.  v. 
Rooney,  supra;  Cuming  v.  Roderick,  supra).  An  indorser  who  has  not 
designated  his  address  at  the  time  of  his  indorsement  cannot  justly  demand 
that  this  additional  risk  of  selecting  the  correct  address  be  voluntarily 
assumed  by  the  holder.  The  statute  declares  the  latter's  duty,  while 
affording  the  indorser  ample  means  of  protection.  If  he  omits  to  avail 
himself  of  that  protection,  the  omission  cannot  well  be  remedied  by  an  at- 
tempt to  enlarge  the  holder's  duties  beyond  the  plain  meaning  of  the  law. 
Where  the  notice  has  been  mailed  as  required  by  the  statute,  the  Hability 
of  the  indorser  becomes  fixed,  although  the  notice  may  not  be  received  by 
him. 

Du  Pont  Co.  V.  Rooney,  63  Misc.  Rep.  344,  346,  117  N.  Y.  Supp.  220; 
Ebling  Brewing  Co.  v.  Reinheimer,  32  Misc.  Rep.  594,  66  N.Y.  Supp.  458; 
Webber  v.  Gotthold,  8  Misc.  Rep.  503,  28  N.  Y.  Supp.  763;  Bartlett  v. 
Robinson,  39  N.  Y.  187;  Requa  v.  Collins,  51  N.  Y.  145;  Cummings  v. 
Roderick,  167  N.  Y.  571;  University  Press  v.  Williams,  48  App.  Div. 
(N.  Y.)  188;  McGrath  v.  Francolini,  92  Misc.  364;  Bacon  v.  Hanna,  137 
N.  Y.  382;  Lankofsky  v.  Raymond,  217  Mass.  99. 

A  notice  addressed  to  the  indorser  at  "New  York"  is  insufficient 
where  there  is  no  evidence  that  he  lived,  ever  had  lived,  or  was  sojourning 
in  New  York,  and  no  inqtiiry  was  made  to  ascertain  whether  such  was  a 
fact. 

Fonesca  v.  Hartman,  84  N.  Y.  131. 

Notice  is  sufficient  if  mailed  to  the  indorser,  at  the  place  where  the 
collecting  agent  believes  he  Hves,  although  he  does  not  live  there  and  the 
holder  knows  his  residence  but  fails  to  communicate  it  to  the  agent. 

Bartlett  v.  Isbell,  31  Conn.  296. 

Subd.  2.— In  Hussey  v.  Sutton,  160  N.  Y.  Supp.  936,  the  defendant 
resided  in  the  village  of  Akron  and  had  his  place  of  business  at  Buffalo. 
The  notary's  certificate  of  protest  stated  that  the  notice  of  protest  was 
directed  to  the  defendant  at  Buffalo,  which  notice  was  not  received.  Quot- 
ing this  section  the  court  held,  there  was  proper  notice. 

See  also,  Montgomery  v.  Marsh,  7  N.  Y.  482;  Scott  v.  Brown,  240 
Pa.  St.  328. 

The  defendant  indorsed  a  note,  payable  at  309  Broadway,  New  York 
City,  where  his  attorney's  office  was  located.  The  notary,  who  protested 
the  note,  sent  a  notice  of  dishonor  intended  for  the  defendant  to  that 
address.     The  defendant  testified  that  he  never  lived,  transacted  business 


266  NEGOTIABLE   INSTKUMENTS   LAW 

or  received  his  mail  at  the  address  mentioned.  The  notary  was  unable 
to  state  what  steps  he  had  taken  to  locate  the  defendant.  It  was  held 
that  the  notice  was  insufficient. 

Mechanic  v.  Elgie  Iron  Works,  163  N.  Y.  Supp.  97. 

Subd.  3. — Although  the  residence  or  place  of  business  is  the  usual 
and  proper  place  for  giving  notice,  it  will  be  good  if  actually  given 
an3rwhere. 

Dicken  v.  Hall,  87  Pa.  St.  380;  Eastern  Bank  v.  Brown,  17  Me  356; 
Lowell  Trust  Co.  v.  Pratt,  183  Mass.  379;  Citizens'  National  Bank  v. 
Cade,  73  Mich.  449. 

Subd.  4. — Notice  of  dishonor  by  telegraph  is  good. 

Jurgens  v.  Schulter,  124  App.  Div.  (N.  Y.)  531. 

Notice  of  dishonor  of  a  promissory  note  erroneously  addressed  on  its 
face  to  maker  but  sent  by  mail  to  and  received  by  the  indorser  is  sufficient 
in  absence  of  proof  that  the  endorser  was  misled  thereby. 

Wilson  v.  Peck,  66  Misc.  179. 

§  180.  Waiver  of  notice.  Notice  of  dishonor  may  be 
waived,  either  before  the  time  of  giving  notice  has  arrived,  or 
after  the  omission  to  give  due  notice,  and  the  waiver  may  be 
express  or  implied. 

The  waiver  may  be  either  verbal  or  in  writing,  and  it  is  not  necessary 
that  it  should  be  direct  and  positive.  It  may  result  from  implication  and 
usage,  or  from  any  imderstanding  between  the  parties  which  is  of  a  char- 
acter to  satisfy  the  mind  that  a  waiver  is  intended.  Before  the  maturity 
of  a  note,  the  defendant  indorser  called  upon  the  plaintiff,  who  was  the 
holder,  and  asked  to  have  it  extended  another  year.  To  this  the  plaintiff 
agreed,  on  condition  that  the  defendant  should  let  his  name  remain  upon 
it  and  "let  it  be  as  it  was."  To  this  the  defendant  said  yes.  This  was  held 
to  be  a  waiver  of  the  indorser's  right  to  a  demand  of  payment  and  notice 
of  non-payment  thereof. 

Cady  V.  Bradshaw,  116  N.  Y.  188;  Gawtry  v.  Doane,  48  Barb.  148; 
Linthiomi  v.  Caswell,  19  App.  Div.  (N.  Y.)  541;  First  National  Bank  v. 
Weston,  25  App.  Div.  414. 

An  agreement  at  or  before  maturity  of  the  note  that  an  extension  of 
time  shall  be  given  is  a  sufficient  circumstance  or  fact  to  authorize  an  infer- 
ence of  waiver.  Daniel  on  Neg.  Inst.  (4th  Ed.)  Section  1106;  Sheldon  v. 
Horton,  43  N.  Y.  93,  3  Am.  Rep.  669;  Amoskeag  Bank  v.  Moore,  37  N.H. 
539,  75  Am.  Dec.  156;  Ridgway  v.  Day,  13  Pa.  208;  Robinson  v.  Holmes, 
109  Pac.  754.  Any  act,  coiu^se  of  conduct,  or  language  of  the  indorser 
calculated  to  induce  the  holder  not  to  make  demand  or  protest  or  give 
notice,  or  to  put  him  off  his  guard,  or  any  agreement  to  that  effect,  will 


NOTICE   OF   DISHONOR 


267 


dispense  with  the  necessity  of  taking  such  steps.  Daniel  on  Neg.  Inst. 
(4th  ed.)  Section  1103;  Boyd  v.  Bank  of  Toledo,  32  Ohio  St.  526,  30  Am. 
Rep.  624;  Torbert  v.  Montague,  38  Colo.  325,87  Pac.  1145;  Taunton  Bank 
V.  Richardson,  5  Pick.  (Mass.)  436;  Yaeger  v.  Farwell,  13  Wall.  6,  20  L. 
Ed.  476.  The  contingent  liability  of  an  indorser  is  changed  into  a  fixed 
liabiHty  by  waiver  of  demand  and  notice.  Amoskeag  Bank  v.  Moore, 
supra. 

Stephenson  v.  Brown,  147  Pa.  St.  303. 

The  fact  that  an  indorser  of  an  instrument,  waiving  demand,  notice 
and  protest,  could  neither  read  nor  write,  beyond  the  making  of  his  sig- 
nature, is  immaterial  unless  it  appears  that  the  indorsee  was  aware  of  the 
fact. 

First  National  Bank  v.  Stolz,  183  S.  W.  (Mo.)  675. 

A  waiver  must  be  made  by  one  having  the  capacity  to  incur  obHga- 
tions,  but,  inasmuch  as  notice  left  with  a  clerk  or  party  in  charge  of  an 
indorser 's  place  of  business  is  sufficient,  it  follows  that  a  waiver  by  a  person 
so  in  charge  is  effective."     7  Cyc.  1124. 

Ludington  v.  Thompson,  4  App.  Div.  120. 

A  mere  oral  promise  to  renew  a  note,  made  after  its  maturity  by  an 
accommodation  indorser,  is  not  a  waiver  of  the  failure  to  give  notice  of 
dishonor;  such  promise  is  not  an  acknowledgement  of  liability. 

Mechanics'  Bank  v.  Katterjohn,  125  S.  W.  (Ky.)  1071. 

A  waiver  must  be  clearly  established  and  will  not  be  inferred  from 
doubtful  or  equivocal  acts  or  language. 

Ross  v.  Kurd,  71  N.  Y.  14,  18;  Nevins  v.  Moore,  221  Mo.  331;  First 
National  Bank  v.  Gridley,  112  App.  Div.  405. 

Where  a  bank  in  which  an  indorsed  check  had  been  deposited  by 
the  indorser,  failed  to  give  him  due  notice  of  dishonor,  the  indorser  by 
giving  his  check  to  take  up  the  dishonored  check  and  receiving  it,  waived 
the  giving  of  notice  of  dishonor  under  this  section,  and  cannot  thereafter 
maintain  an  action  against  the  bank  for  negligence  in  failing  to  notify  the 
prior  parties  of  the  dishonor  of  the  check. 

Weil  V.  Com  Exchange  Bank,  63  Misc.  300. 

The  fact  that  the  indorser  was  secured  by  a  mortgage  did  not  dispense 
with  the  necessity  of  presenting  the  note  for  payment  and  notice  of 
nonpayment. 

Seacord  v.  Miller,  13  N.  Y.  55;  First  National  Bank  of  Binghamton  v. 
Marlborough,  163  App.  Div.  (N.  Y.)  72;  Moore  v.  Alexander,  63  App. 
Div.  (N.  Y.)  100. 

Promise  of  payment  by  indorser,  see,  Losee  v.  Allen,  17  Misc.  275; 
Sheldon  v.  Horton,  43  N.  Y.  93;  Brown  v.  Mechanics'  Bank,  16  App.  Div. 
207. 


268  NEGOTIABLE   INSTRUMENTS   LAW 

As  to  waiver  by  partners,  see,  Miller  v.  Hackley,  4  App.  Div.  (N.  Y.) 
117. 

A  waiver  by  the  indorser  of  a  promissory  note  of  demand  upon  the 
maker  is  not  a  waiver  of  notice  of  the  maker's  default. 

Hall  V.  Crane,  213  Mass.;  Bumham  v.  Webster,  17  Maine  50. 

If  an  indorser  of  a  note,  after  the  time  for  making  a  demand  on  the 
maker  required  to  charge  him  as  an  indorser  has  expired  without  such 
demand  having  been  made,  signs  upon  the  back  of  the  note  a  waiver  of 
"demand,  notice  and  protest,"  knowing  the  facts  which  have  released  him 
from  Hability  but  in  ignorance  of  their  legal  effect,  such  ignorance  in  the 
absence  of  fraud  does  not  save  him  from  the  consequence  of  his  waiver. 

Toole  V.  Crafts,  193  Mass.  110. 

A  waiver  may  be  express  or  implied.  It  is  express  when  there  is  an 
agreement  between  the  parties  to  the  effect  that  the  holder  need  not  make 
a  demand  or  give  notice  of  dishonor;  it  is  implied  when  the  acts  of  the 
indorser  communicated  to  the  holder  are  such  as  to  give  the  holder  the 
right  to  believe  that  the  indorser  consents  that  there  shall  be  no  presentment 
and  no  notice  of  dishonor. 

First  National  Bank  v.  Gridley,  112  App.  Div.  (N.  Y.)  406;  Cayuga 
Co.  Bank  v.  Dill,  5  Hill  403;  Sheldon  v.  Horton,  43  N.  Y.  33;  Leary  v. 
Miller,  61  N.  Y.  488;  National  Hudson  Bank  v.  Reynolds,  57  Hun.  307; 
Weil  V.  Com  Exchange  Bank,  63  Misc.  300. 

Pleadings. — An  allegation  of  a  waiver,  by  an  indorser  of  a  promissory- 
note,  of  notice  of  dishonor,  contained  in  the  complaint  in  an  action  brought 
to  enforce  the  indorser's  liabiHty,  is  not  sufficient  unless  it  states  the  facts 
from  which  the  imphcation  of  waiver  relied  upon  may  be  deducted. 

Congress  Brewing  Co.  v.  Habenicht,  83  App.  Div.  141. 

An  allegation  in  the  complaint  that  the  indorsement  was  made  with 
intent  to  give  credit  to  the  maker  of  the  note,  and  that  the  note  was 
delivered  and  accepted  upon  the  faith  of  the  indorsement,  does  not  entitle 
the  plaintiff  to  prove  for  the  purpose  of  establishing  such  a  waiver  by  the 
indorser,  that  the  note  was  accepted  upon  the  indorser's  promise  to  treat 
it  as  his  own  paper  and  see  that  it  was  paid  at  maturity,  if  such  a  promise 
when  made  before  the  note  was  indorsed,  was  merged  in  the  contract  of 
indorsement. 

Bird  V.  Kay,  40  App.  Div.  (N.  Y.)  533;  4  Am.  &  Eng.  Ency.  of  Law, 
(2nd  ed.)  458. 

§  i8i.  Whom  affected  by  waiver.  Where  the  waiver  is 
embodied  in  the  instrument  itself,  it  is  binding  upon  all  parties ; 
but  where  it  is  written  above  the  signature  of  an  indorser,  it 
binds  him  only. 


NOTICE    OF   DISHONOR 


269 


One  who,  in  blank,  indorses  a  note,  is  bound  by  waiver  of  presentation, 
protest  and  notice  of  nonpayment  contained  in  the  body  of  the  note. 

Phillips  V.  Dippo,  93  Iowa  85;  Dan.  Neg.  Inst.  Section  1092;  Bryant 
V.  Lord,  19  Minn.  405;  Bank  v.  Ewing,  78  Ky.  266. 

A  waiver  of  protest  of  a  note  by  an  indorser  before  maturity  releases 
the  holder  from  the  necessity  of  making  demand  and  of  notifying  the  in- 
dorser of  nonpayment. 

Annville  Bank  v.  Kettering,  106  Pa.  St.  531. 

A  waiver  written  in  the  body  of  the  instrument  applies  to  the  indorser 
as  well  as  to  the  maker. 

Savings  Bank  v.  Haynes,  143  Ky.  534. 

§  182.  Waiver  of  protest.  A  waiver  of  protest,  whether 
in  the  case  of  a  foreign  bill  of  exchange  or  other  negotiable 
instniment,  is  deemed  to  be  a  waiver  not  only  of  a  formal  pro- 
test, but  also  of  presentment  and  notice  of  dishonor. 

See  cases  cited  under  Section  180. 

A  waiver  of  notice  of  protest  waives  notice  only  and  is  not  a  waiver  of 
presentment,  but  a  waiver  of  protest  operates  to  waive  presentment  and 
notice  of  dishonor. 

Atkinson  v.  Skidmore,  153  S.  W.  Rep.  457;  Sprague  v.  Fletcher,  34 
Am.  Rep.  587;  Lammert  v.  Guthrie,  111  Am.  Rep.  561;  Bank  v.  Hopson, 
53  Conn.  453;  Bank  of  Montpelier  v.  Lumber  Co.,  102  Pac.  (la.)  685. 

The  term  protest  in  a  strict  technical  sense  is  not  applicable  to  promis- 
sory notes.  The  word  has  by  general  usage  acquired  a  more  extensive 
signification  and  includes  all  those  acts  which  by  law  are  necessary  to 
charge  an  indorser.  When  among  men  of  business  a  note  is  said  to  be 
protested,  something  more  is  imderstood  than  an  official  declaration  of  a 
notary.  The  expression  would  be  used  to  indicate  a  series  of  acts  necessary 
to  convert  a  conditional  into  an  absolute  liability. 

Coddington  v.  Davis,  1  N.  Y.  189. 

Strictly  speaking,  the  term  "protest"  applies  only  to  foreign  bills, 
but  the  custom  to  treat  inland  bills  and  notes  in  the  same  manner  has 
become  so  nearly  universal,  that  in  common  usage  the  term  means  the 
taking  of  such  steps  as  are  required  to  charge  the  indorser. 

Annville  Bank  v.  Kettering,  106  Pa.  St.  531. 

Where  an  indorser,  at  or  before  the  time  the  note  becomes  due,  says 
to  the  holder  that  arrangements  for  its  payment  are  being  made,  and  in 
direct  terms  or  by  reasonable  implication  requests  the  holder  to  wait  or 
give  time,  this  amounts  to  an  assurance  that  it  will  be  paid  and  that  the 
promisor  or  indorser  will  pay  it,  and  is  a  waiver  of  demand  and  notice. 


270  NEGOTIABLE    INSTRUMENTS    LAW 

It  tends  to  put  the  holder  oflf  his  guard,  and  induces  him  to  forego  making 
a  demand  at  the  proper  time  and  place,  and  it  would  be  contrary  to  good 
faith  to  set  up  such  want  of  demand  and  notice — caused  perhaps  by  such 
forebearance — as  a  ground  of  defense. 

Bessenger  v.  Wenzel,  161  Mich.  61;  27  L.  R.  A.  516;  3  R.  C.  L.  1240. 

See  section  261  and  notes. 

Pleading. — In  an  action  upon  a  promissory  note  the  complaint  alleged 
the  making  of  the  note  by  defendant,  the  indorsement  thereof  by  the 
defendants,  its  due  presentation  for  payment,  a  demand  and  refusal,  and 
then  added  ''Whereupon  the  said  note  was  then  and  there  duly  protested 
for  nonpayment,  all  of  which  the  said  Hammond  (the  maker)  had  notice." 
There  was  no  averment  that  notice  of  protest  was  given  to  the  indorser. 
Held,  that  the  complaint  was  defective.  The  averment  that  the  note  was 
duly  protested  was  not  a  sufficient  allegation  of  notice  to  the  indorser;  and 
that  the  averment  of  notice  to  the  maker  tends  to  exclude  the  idea  of  an 
intention  to  aver  notice  also  to  the  indorser. 

Cook  V.  Warren,  88  N.  Y.  37. 

§  183.  When  notice  dispensed  with.  Notice  of  dishonor 
is  dispensed  with  when,  after  the  exercise  of  reasonable 
dihgence,  it  can  not  be  given  to  or  does  not  reach  the  parties 
sought  to  be  charged. 

Reasonable  diligence. — The  law  does  not  exact  every  possible  exertion 
which  might  have  been  made  to  affect  notice  of  dishonor  of  the  paper. 

Bank  of  Jefferson  v.  Darling,  91  Hun.  236;  Hobbs  v.  Strain,  149  Mass. 
212. 

As  to  what  constitutes  reasonable  diligence  depends  upon  the  cir- 
cumstances of  each  case,  and  must  be  determined  with  reference  to  what 
wotdd  have  suggested  itself  as  necessary  under  the  circumstances  to  the 
man  of  ordinary  prudence  and  intelligence. 

Brewster  v.  Schrader,  26  Misc.  486;  Crouse  v.  First  National  Bank, 
137  N.  Y.  383;  Rowland  v.  Adrian,  29  N.  J.  Law  42;  Bank  of  Hartford 
V.  Stedman,  3  Conn.  494. 

Whether  sufficient  dihgence  has  been  shown,  the  facts  being  undis- 
puted, is  a  question  of  law. 

Smith  V.  Poillon,  87  N.  Y.  590;  Gawtry  v.  Doane,  51  N.  Y.  92; 
Lamence  v.  Miller,  16  N.  Y.  235;  Haly  v.  Brown,  5  Pa.  St.  178;  Brewster 
V.  Shrader,  26  Misc.  480;  Harris  v.  Robinson,  4  How.  (U.  S.)  336;  Siegel 
V.  Dubinsky,  56  Misc.  681;  Vogel  v.  Starr,  132  Mo.  App.  430. 

Merely  looking  in  a  directory,  and  not  pursuing  the  inquiry  any 
further,  to  ascertain  the  residence  or  place  of  business  of  a  person  to  be 


NOTICE    OF   DISHONOK  271 

served  with  notice,  is  not  diligent  inquiry  within  the  meaning  of  this 
section. 

Greenwich  Bank  v.  DeGroot,  7  Hun.  210;  Bacon  v.  Hanna,  137  N.  Y. 
379;  Cuming  v.  Roderick,  28  App.  Div.  (N.  Y.)  257;  Gawtry  v.  Doane, 
51  N.  Y.  84;  Requa  v.  Collins,  51  N.  Y.  114,  147. 

By  making  no  inquiry  and  merely  mailing  the  notice  to  the  indorser, 
in  care  of  the  maker,  at  the  maker's  street  address,  is  not  in  compliance 
with  this  section  and  Section  179. 

Du  Pont  Powder  Co.  v.  Rooney,  63  Misc.  344;  McGrath  v.  FrancoHni, 
92  Misc.  367. 

In  an  action  against  an  indorser  of  a  note,  the  notary's  testimony 
that  he  mailed  the  notice  of  dishonor,  the  contents  of  which  were  not  in 
the  record,  to  the  indorser  at  a  certain  address,  and  that  he  did  not  even 
know  whether  he  looked  for  the  indorser 's  address  in  a  city  or  telephone 
directory,  the  indorser  testifying  that  he  never  lived,  did  business,  or 
received  his  mail  at  the  address,  did  not  entitle  plaintiff  to  avail  of  this 
section. 

Mechanic  v.  Elgie  Iron  Co.,  163  N.  Y.  Supp.  97  . 

§  184.  Delay  in  giving  notice;  how  excused.  Delay  in 
giving  notice  of  dishonor  is  excused  when  the  delay  is  caused 
by  circumstances  beyond  the  control  of  the  holder  and  not 
imputable  to  his  default,  misconduct  or  negligence.  When 
the  cause  of  delay  ceases  to  operate,  notice  must  be  given  with 
reasonable  diligence. 

War  an  excuse. — Woods  v.  Wilder,  43  N.  Y.  164;  Griswold  v.  Wad- 
dington,  19  Johns,  438;  Morgan  v.  Bank  of  Louisville,  4  Bush  (Ky.)  82; 
Harden  v.  Boyer,  59  Barb.  425;  Polk  v.  Spink,  98  Am.  Dec.  426. 

Disease  an  excuse. — Tunno  v,  Lague,  2  Johns,  Cas.  1;  Dugan  v. 
King,  33  Am.  Dec.  107. 

Delay  in  mail  an  excuse. — The  cessation  of  mails  and  of  commercial 
intercoiirse  generally  is  an  excuse. 

House  V.  Adams,  48  Pa.  St.  261;  86  Am.  Dec.  588. 

§  185.  When    notice    need    not    be    given    to    drawer. 

Notice  of  dishonor  is  not  required  to  be  given  to  the  drawer  in 
either  of  the  following  cases: 

1.  Where  the  drawer  and  drawee  are  the  same  person; 

2.  Where  the  drawee  is  a  fictitious  person  or  a  person 
not  having  capacity  to  contract; 


272  NEGOTIABLE   INSTRUMENTS    LAW 

3.  Where  the  drawer  is  the  person  to  whom  the  instru- 
ment is  presented  for  payment; 

4.  Where  the  drawer  has  no  right  to  expect  or  reqtiire 
that  the  drawee  or  acceptor  will  honor  the  instrument; 

5.  Where  the  drawer  has  countermanded  payment. 

Subd.  I. — An  order  drawn  by  the  president  of  a  railroad  corporation 
upon  its  treasiirer,  directing  the  latter  to  pay  B  or  order  a  specified  sum, 
stated  as  being  the  amount  due  B  for  work  done  by  him  as  contractor 
on  the  railroad  work,  is  in  effect  a  promissory  note  and  presentment  and 
demand  of  payment  are  unnecessary. 

Fairchild  v.  O.  C.  &  R.  R.  R.  Co.,  15  N.  Y.  337. 

Subd.  3. — Where  the  drawer  of  a  bill  is  a  partner  of  the  house  or 
firm  on  which  it  is  drawn,  it  is  not  necessary  for  the  holder  to  prove  that 
notice  of  its  dishonor  was  given  to  the  drawer. 

Gowan  v.  Jackson,  20  Johns.  176. 

Subd.  5. — In  an  action  upon  a  bank  check  it  is  not  necessary  that  the 

complaint  should  state  that  notice  of  dishonor  of  the  check  was  given 
to  the  drawer  in  case  the  drawer  stopped  payment  of  the  check,  but  it 
should  contain  an  allegation  that  payment  was  stopped. 

Scanlon  V.  Wallach,  53  Misc.  104;  Harker  v.  Anderson,  21  Wend.  372; 
Purchase  v.  Mattison,  13  N.  Y.  Supp.  587. 

§  186.  When   notice   need   not   be   given   to   indorser. 

Notice  of  dishonor  is  not  required  to  be  given  to  an  indorser 
in  either  of  the  following  cases: 

1 .  Where  the  drawee  is  a  fictitious  person  or  a  person  not 
having  capacity  to  contract,  and  the  indorser  was  aware  of 
the  fact  at  the  time  he  indorsed  the  instrument; 

2.  Where  the  indorser  is  the  person  to  whom  the  instru- 
ment is  presented  for  payment; 

3.  Where  the  instnmient  was  made  or  accepted  for  his 
accommodation. 

Subd.  I. — See  notes  subd.  3,  Section  28. 

As  to  the  liability  of  an  indorser  of  a  void  instnmient,  see  Bank  v. 
Loomis,  85  N.  Y.  207. 

An  indorsement  of  negotiable  paper  is  a  warranty,  by  him  who  makes 
it,  to  every  subsequent  holder  in  good  faith,  that  the  instrument  itself  and 
all  the  signatures  antecedent  to  such  indorsement  are  genuine;  and  where 


NOTICE    OF   DISHONOR  273 

these  signatures  are  forgeries,  the  indorser  is  at  once  liable  upon  his 
warranty  to  such  subsequent  holder  without  any  presentment  for  payment 
or  notice  of  nonpa^Tnent. 

Tumbull  V.  Bowyer,  40  N.  Y.  457. 

Subd.  2. — Where  a  negotiable  promissory  note  has  been  protested  for 
nonpayment,  and  the  liability  of  the  indorsers  thereof  has  been  fixed  by 
notice,  such  indorsers,  selling  such  note  without  erasing  their  indorsement, 
will  be  held  responsible  for  the  payment  of  the  same,  though  no  notice  be 
given  to  them  of  its  nonpayment  by  the  maker. 

St.  John  V.  Roberts,  31  N.  Y.  441. 

The  piupose  of  giving  notice  is  fully  served  when  the  indorser  has 
actual  knowledge  of  the  dishonor  and  the  law  does  not  require  the  doing 
of  a  vain  and  useless  act. 

Electric  Co.  v.  Hodge,  181  Mo.  App.  234;  see  also,  in  re  McGill,  106 
Fed.  Rep.  (Oh.)  57. 

Subd.  3. — If,  as  between  the  parties,  the  indorser  is  shown  to  be  the 
principal  debtor,  the  note  having  been  made  for  his  accommodation  or, 
in  other  words,  that  he  has  no  recourse  against  the  maker,  then  it  is  not 
the  strict  contract  of  indorsement,  and  demand  and  notice  are  not 
necessary. 

Witherow  v.  Slayback,  158  N.  Y.  649;  Ray  v.  Smith,  17  Wall.  415; 
Story  on  Promissory  Notes,  Section  268,  357;  Blenderman  v.  Price,  50 
N.  J.  L.  296. 

If  an  indorser  obtains  a  note  to  be  discounted  for  his  own  benefit  and 
accommodation,  he  is  not  entitled  to  notice,  and  so  too,  if  he  cannot  be 
found  after  reasonable  diligence. 

Beale  v.  Parrish,  20  N.  Y.  407. 

A  stockholder  of  a  corporation,  who  indorsed  before  delivery,  a  note 
made  by  another  corporation  for  the  benefit  of  the  corporation  is  not 
entitled  to  notice  of  dishonor,  because  the  note  was  for  his  own  benefit. 

Mercantile  Bank  v.  Busby,  113  S.  W.  (Tenn.)  390;  Luekenbach  v. 
McDonald,  164  Fed.  Rep.  298. 

§  187.  Notice  of  non-payment  where  acceptance  refused. 

Where  due  notice  of  dishonor  by  non-acceptance  has  been 
given,  notice  of  a  subsequent  dishonor  by  non-payment  is 
not  necessary,  unless  in  the  meantime  the  instrument  has  been 
accepted. 

§  188.  Efifect  of  omission  to  give  notice  of  non-accept- 
ance.    An  omission  to  give  notice  of  dishonor  by  non-accept- 


274  NEGOTIABLE    INSTRUMENTS   LAW 

ance  does  not  prejudice  the  rights  of  a  holder  in  due  course 
subsequent  to  the  omission. 

Variant. — The  Wisconsin  statute  adds  the  following,  "but  this  shall 
not  be  construed  to  relieve  any  HabiHty  discharged  by  such  omission." 


§  189.  When  protest  need  not  be  made;  when  must  be 
made.  Where  any  negotiable  instrument  has  been  dis- 
honored it  may  be  protested  for  non-acceptance  or  non- 
payment, as  the  case  may  be;  but  protest  is  not  required, 
except  in  the  case  of  foreign  bills  of  exchange. 

See  Sections  260,  268. 

Formal  protest  of  a  promissory  note  by  a  notary  public  is  not  essential 
to  hold  an  indorser.  It  is  mere  proof.  What  is  essential  is  presentment 
and  demand  at  the  time  and  place  provided  for  in  the  instrument,  followed 
by  notice  to  the  indorser  of  such  presentment,  demand  and  nonpayment. 

McBride  v.  Illinois  National  Bank,  138  App.  Div.  (N.  Y.)  346. 

While  it  is  customary  to  protest  a  promissory  note  for  nonpa3rment, 
yet  such  protest  is  unnecessary.  All  that  is  required  is  that  the  note  shall 
be  presented  for  payment,  and  notice  of  nonpayment  given. 

First  National  Bank  v.  Tustin,  246  Pa.  155. 

Where  a  bill  of  exchange  was  indorsed  by  the  drawers  to  a  firm  of 
bankers  in  the  city  of  New  York,  who  sent  it  to  their  agent  in  Vienna  for 
collection,  and  such  agent  failed  to  demand  payment  thereof,  in  accordance 
with  the  laws  of  this  state,  and  upon  the  refusal  of  the  drawees  to  pay, 
failed  to  protest  the  same  and  give  notice  of  such  protest  to  the  drawers  in 
the  manner  required  by  the  laws  of  this  state,  the  latter  are  discharged 
from  any  liability  thereunder,  notwithstanding  the  instnmient  might  have 
been  under  the  laws  of  Austria,  a  mere  "commercial  order"  for  the  payment 
of  money  of  which  no  protest  need  be  made. 

Amsinck  v.  Rogers,  189  N.  Y.  252. 

It  is  not  necessary,  in  order  to  charge  an  indorser  of  a  promissory  note 
which  the  maker  failed  to  pay  when  it  became  due,  to  prove  a  formal  pro- 
test by  a  notary;  it  is  enough  to  prove  that  there  has  been  proper  demand 
upon  the  maker  and  a  refusal  by  him  to  make  payment,  and  that  season- 
able notice  of  these  facts  has  been  given  to  the  holder. 

Demelman  v.  Brazier,  198  Mass.  458;  Wisner  v.  First  National  Bank, 
220  Pa.  St.  21. 

Protest  is  not  necessary  in  order  to  charge  the  maker  of  a  note. 

City  National  Bank  v.  Given,  87  S.  E.  998. 


DISCHARGE  275 

ARTICLE  10 

Discharge 

Section  200.  Instrument;  how  discharged. 

201.  When  persons  secondarily  Hable  on,  discharged. 

202.  Right  of  party  who  discharges  instrument. 

203.  Renunciation  by  holder. 

204.  Cancellation;  unintentional;  burden  of  proof. 

205.  Alteration  of  instrument;  effect  of. 

206.  What  constitutes  a  material  alteration. 

§  200.  Instrument;  how  discharged.     A  negotiable  in- 
strument is  discharged: 

1 .  By  payment  in  due  course  by  or  on  behalf  of  the  prin- 
cipal debtor; 

2.  By  payment  in  due  course  by  the  party  accommodated, 
where  the  instrument  is  made  or  accepted  for  accommodation; 

3.  By  the  intentional  cancellation  thereof  by  the  holder; 

4.  By  any  other  act  which  will  discharge  a  simple  con- 
tract for  the  payment  of  money; 

5.  When  the  principal  debtor  becomes  the  holder  of  the 
instrument  at  or  after  maturity  in  his  own  right. 

Variant. — The  Illinois  statute  omits  subdivision  4. 


In  view  of  this  section  it  would  seem  plain  that  it  meant  that  the 
particular  method  prescribed  for  the  accomplishment  of  that  result  should 
exclude  a  discharge  by  any  other,  or  different  method,  upon  the  familiar 
maxim  that  the  express  mention  of  one  thing  implies  the  exclusion  of 
another. 


276  NEGOTIABLE    INSTRUMENTS   LAW 

Vanderford  v.  Farmers'  Bank,  105  Md.  168;  Union  Trust  Co.  v. 
McGinty,  212  ]Mass.  205;  Bradley  v.  Heybiim,  106  Pac.  170;  State  Bank 
V.  Williams,  164  Ky.  143;  Pease  v.  Syler,  78  Wash.  31. 

Subd.  I. — A  payment  made  to  a  holder  of  a  promissory  note  by  an 
indorser,  not  an  agent  for  the  maker  but  simply  in  discharge  of  his  obliga- 
tion as  indorser,  where  the  note  was  executed  by  the  maker  for  value,  does 
not  inure  to  the  benefit  of  the  latter,  and  in  an  action  upon  the  note  he  is 
liable  for  the  whole  amount  thereof,  notwithstanding  the  payment;  so  far 
as  the  pa^inent  relates  to  the  maker's  liability,  it  is  simply  an  equitable 
purchase  pro  tanto  by  the  indorser. 

Madison  Square  Bank  v.  Pierce,  137  N.  Y.  444;  Cantrell  v.  Davidson, 
180  Mo.  App.  410. 

When  the  maker  of  a  note  transferred  to  the  payee  money  belonging 
to  another  and  thereby  obtained  possession  of  the  note  and  destroyed  it, 
though  the  note  was  in  form  paid,  the  transaction  was  not  in  equity  and 
justice  a  "pa\Tnent  in  due  course"  by  or  on  behalf  of  the  principal  debtor 
within  the  meaning  of  this  section. 

Pittsburgh-Westmoreland  Coal  Co.  v.  Kerr,  220  N.  Y.  137. 

As  to  the  distinction  between  payment  and  sale  see, 

Lancey  v.  Clark,  64  N.  Y.  209. 

Payment  must  be  in  money. 

De  Meto  v.  Dagson,  53  N.  Y.  635. 

The  payor  is  entitled  to  demand  the  surrender  of  the  instrument. 

Crandall  v.  Schroeppel,  1  Hun.  558. 

The  taking  of  a  note,  either  of  a  debtor  or  a  third  person,  for  a  prece- 
dent debt  is  no  payment  imless  it  be  expressly  agreed  to  take  the  note  as 
payment  and  run  the  risk  of  its  being  paid;  or  unless  the  creditor  parts 
with  the  note,  or  is  guilty  of  latches  in  not  presenting  it  for  payment. 

Elwood  v.  Diefendorf,  5  Barb.  398;  Ruhl  v.  Martens,  40  App.  Div. 
(N.  Y.)  232. 

It  is  a  general  rule  of  law  that  when  an  instnmient  upon  which  several 
are  liable,  some  primarily  and  some  secondarily,  if  it  is  satisfied  by  him 
who  is  primarily  Hable,  a  complete  discharge  results.  It  no  longer  has 
legal  existence. 

Comstock  V.  Buckley,  141  Wis.  231;  Snyder  v.  Malone,  102  N.  W. 
354;  Northern  Bank  v.  Cooke,  76  Ky.  340;  Rich  v.  Goldman,  90  N.  Y. 
Supp.  364;  Spies  v.  National  City  Bank,  174  N.  Y.  222. 


DISCHARGE  277 

When  an  indorser  takes  up  a  note  after  it  has  been  dishonored  is  in 
effect  a  repurchase  and  not  a  payment  of  it,  and  the  indorser  retains  all 
the  former  rights  which  he  had  against  the  prior  parties. 

Kelly  V.  Stead,  136  Mo.  430,  37  S.  W.  1110;  Cochran  v.  Wheeler,  7 
N.  H.  202,  26  Am.  Dec.  732. 

The  maker  of  a  promissory  note  can  satisfy  it  only  by  payment  to  the 
owner  at  the  time,  or  to  such  owner's  authorized  agent.  If  the  recipient 
of  the  money  is  not  actually  authorized,  the  payment  is  ineffectual,  tinless 
induced  by  imambigious  direction  from  the  owner  or  justified  by  actual 
possession  of  the  note.  This  rule  applies  generally  to  all  negotiable  paper, 
independently  of  the  existence  of  any  mortgage  or  other  security. 

Marling  v.  Nommensen,  127  Wis.  363;  115  Am.  St.  Rep.  1017; 
Harrison  National  Bank  v.  Austin,  65  Neb.  632. 

As  to  payment  through  clearing  house,  see.  National  Union  Bank  v. 
Earle,  93  Fed.  Rep.  330;  Title  G.  &  T.Co.  v.  Haven,  126  App.  Div.  (N.  Y.) 
802;  Exchange  Bank  v.  Ginn,  114  Md.  181;  Boylston  v.  Bank  of  Richard- 
son, 101  Mass.  287;  Tradesmen's  Bank  v.  Bank,  66  Pa.  St.  435;  People  v. 
St.  Nicholas  Bank,  77  Hun.  159;  Mt.  Morris  Bank  v.  Ward  Bank,  172 
N.  Y.  244;  National  Bank  Commerce  v.  Mechanics  Bank,  148  Mo.  App.  1; 
Columbia  Knickerbocker  T.  Co.  v.  Miller,  215  N.  Y.  191. 

The  btirden  of  proof  as  to  payment  is  on  the  maker. 

Guano  v.  Marks,  135  N.  C.  59. 

Sub.  2. — The  holder  of  a  note  with  whom  the  indorser  had  deposited 
the  full  amoimt  thereof  as  security  for  its  collection  may  maintain  an  action 
against  the  maker. 

People's  National  Bank  v.  Rice,  149  App.  Div.  (N.  Y.)  18;  Madison 
Sq.  Bank  v.  Pierce,  137  N.  Y.  444. 

Subd.  3. — Where  the  holder  of  a  promissory  note  voltmtarily  cancels 
the  same,  and  surrenders  it  to  the  maker,  this,  although  no  consideration 
was  paid,  in  the  absence  of  fraud  or  mistake,  operates  in  law  as  a  release 
and  discharge  of  the  maker's  liability. 

Larkin  v.  Hardenbrook,  90  N.  Y.  333;  Albert  v.  Ziegler,  29  Pa.  St.  50; 
Kent  V.  Reynolds,  8  Hun.  559;  Wheeler  v.  Billings,  38  N.  Y.  263;  Barker 
v.  Bradley,  42  N.  Y.  316;  Jaffray  v.  Davis,  124  N.  Y.  164;  Swartzman  v. 
Post,  94  App.  Div.  (N.  Y.)  474;  Case  v.  Bridger,  133  La.  754;  Van  Auken 
V.  Hombeck,  14  N.  J.  L.  178. 

When  the  payee  of  a  note  tears  it  up,  with  the  intention  of  destroying 
and  cancelling  it,  this  is  a  discharge  of  the  note. 

Montgomery  v.  Schwald,  177  Mo.  App.  75. 

Where  an  instniment  or  the  signatiure  thereto  has  been  cancelled 
unintentionally  or  by  mistake,  it  is  no  discharge. 

Manufacturers'  Bank  v.  Thompson,  129  Mass.  438. 


278  NEGOTIABLE    INSTRUMENTS    LAW 

If  one  of  several  joint  owners  of  a  bill  or  note  surrenders  the  instru- 
ment to  the  maker  or  acceptor  for  cancellation,  and  be  done  without  the 
knowledge  or  consent  of  the  other  owners,  the  transaction  amounts  to  a 
conversion  of  the  instrument  and  an  action  lies  in  favor  of  the  defrauded 
owners  against  their  joint  owner. 

Winner  v.  Penniman,  35  Md.  163;  6  Am.  Rep.  385. 

Subd.  4. — Where  a  negotiable  instnmient  is  materially  altered 
without  the  assent  of  the  parties  liable  thereon,  it  is  avoided  except  as 
against  a  party  who  has  himself  made,  authorized,  or  assented  to  such 
alteration.     The  same  rule  applying  to  any  contract. 

Bodine  v.  Berg,  82  N.  J.  L.  662,  40  L.  R.  A.  65. 

Where  plaintiffs  surrendered  to  defendant  the  latter 's  notes  upon 
promise  to  deliver  jewels  to  plaintiffs  in  payment,  and  thereafter  defend- 
ant refused  to  do  so,  plaintiffs  could  rescind  agreement  to  accept  the  jewels 
and  sue  on  the  notes,  and  were  not  obliged  to  sue  for  damages  for  defend- 
ant's refusal  to  carry  out  his  agreement. 

Loeb  V.  Goldsmith,  163  N.  Y.  Supp.  1022. 

Where  a  note  was  provable  in  bankruptcy,  a  letter  to  the  holder 
stating  that  the  maker  would  pay  every  dollar  remaining  unpaid  upon  the 
note,  with  interest,  as  soon  as  he  sold  a  mill,  constituted  a  new  promise 
sufficient  to  remove  the  bar  of  the  discharge  in  bankruptcy. 

Herrington  v.  Davitt,  115  N.  E.  (N.  Y.)  476. 

Subd.  5. — Where  the  holder  of  a  promissory  note  surrenders  it  upon 
the  pa>Tnent  of  part  of  the  amount  due  thereon  and  promises  to  pay  the 
balance  of  the  indebtedness,  the  holder  is  precluded  from  subsequently 
maintaining  an  action  against  the  maker  upon  the  note  to  recover  the 
balance  thereof. 

Schwartzman  v.  Post,  94  App.  Div.  (N.  Y.)  474;  Jaflray  v.  Davis, 
124  N.  Y.  164;  Ellsworth  v.  Fogg,  35  Vt.  355;  Larkin  v.  Hardenbrook, 
90  N.  Y.  333. 

The  words,  "in  his  own  right,"  merely  excludes  the  case  of  a  maker 
acquiring  the  instrument  in  purely  a  representative  capacity  as  executor, 
administrator,  guardian,  etc. 

It  has  been  held  that  w^hether  a  note  is  paid  by  the  taking  of  a  new 
note  or  merely  renewed  depends  upon  the  intention. 

Flanigan  v.  Hambleton,  54  Md.  222;  McElwee  v.  Lumber  Co.,  69 
Fed.  302. 

Where  the  original  note  was  exchanged  for  a  renewal  note  which  was 
forged,  the  holder  may  maintain  an  action  on  the  original  note  although  it 
cannot  be  produced. 

Bass  V.  Wellesey,  192  Mass.  192. 


DISCHAEGE 


279 


Where  the  maker  of  a  promissory  note  induces  the  indorsee  to  pay  it 
when  due  and  thereafter  in  some  way  gets  possession  of  it,  not  claiming 
that  he  paid  it,  or  that  it  was  deHvered  to  him  by  the  indorsee,  never 
became  the  holder  "in  his  own  right."  It  requires  more  than  possession 
of  a  note  obtained  by  accident  or  design  to  extinguish  the  liability  of  the 
maker. 

Korkemas  v.  Macksoud,  131  App.  Div.  728. 

The  fact  that  a  maker  after  maturity  has  possession  of  a  note  is  prima 
facie  evidence  of  its  payment. 

Weakley  v.  Mizell,  193  111.  App.  484;  McCoy  v.  Purcell,  110  N.  E. 
(Ind.)  658. 

§  201.  When  persons  secondarily  liable  on,  discharged. 

A  person  secondarily  liable  on  the  instrument  is  discharged: 

1.  By  any  act  which  discharges  the  instrument; 

2.  By  the  intentional  cancellation  of  his  signature  by  the 
holder ; 

3.  By  the  discharge  of  a  prior  party; 

4.  By  a  valid  tender  of  payment  made  by  a  prior  party ; 

5.  By  a  release  of  the  principal  debtor,  unless  the  holder's 
right  of  recourse  against  the  party  secondarily  liable  is  ex- 
pressly reserved; 

6.  By  any  agreement  binding  upon  the  holder  to  extend 
the  time  of  payment  or  to  postpone  the  holder's  right  to 
enforce  the  instrument,  unless  the  right  of  recourse  against 
such  party  is  expressly  reserved. 

Variant. — In  all  the  states  except  New  York  and  Maryland  the  words 
'  'unless  made  with  the  assent  of  the  party  secondarily  liable  or"  are  inserted 
after  the  word  "instrument"  in  Sub.  6. 

The  IlHnois  Statute  substitutes  for  Subdivision  3— "By  a  valid  tender 
of  payment  made  by  a  prior  party,"  and  adds  to  Sub.  5  the  words:  "or 
unless  the  principal  debtor  be  an  accommodating  party." 

The  Missouri  Statute  adds  to  the  end  of  Sub.  3— "except  when  such 
discharge  is  had  in  bankruptcy  proceedings." 

The  Wisconsin  Statute  adds  a  new  subdivision  as  follows:  "4a.  By 
giving  up  or  applying  to  other  purposes  collateral  security  appHcable  to  the 
debt,  or,  there  being  in  the  holder's  hands  or  within  his  control  the  means 
of  complete  or  partial  satisfaction,  the  same  are  applied  to  other  purposes." 


280  NEGOTIABLE   INSTRUMENTS   LAW 

The  Wisconsin  Statute  adds  the  words:  "prior  or  subsequent"  after 
"assent"  in  Sub.  6,  and  also  adds  the  words  "or  unless  he  is  fiilly  indemni- 
fied" in  the  last  sentence. 


Subd.  I. — While  ordinarily  the  payment  of  a  note  by  the  maker 
terminates  the  liability  of  the  indorser,  yet  the  receipt  of  a  preferred  pay- 
ment made  by  a  person  insolvent  at  the  time,  contrary  to  the  statute,  is  no 
pa>Tnent  and  the  indorsers  are  not  released. 

Perry  v.  Van  Norden  Trust  Co.,  118  App.  Div.  (N.  Y.)  288. 

A  mere  taking  of  another  instnmient  as  collateral,  however,  is  not 
such  an  extension  of  time  as  will  discharge  an  indorser. 

National  Bank  v.  Peltz,  176  Pa.  513. 

Whether  the  acceptance  of  a  new  note  is  in  extinguishment  or  pay- 
ment of  the  old  note  or  is  as  collateral  security  depends  upon  the  intentions 
of  the  parties,  the  presimiption  being  that  it  is  only  a  further  security  for 
the  indebtedness. 

McCarthy  v.  Kipp,  171  Pa.  644. 

Subd.  2. — See  notes  Section  200,  subd.  3. 

The  holder  of  an  indorsed  promissory  note  who  authorized  and  agreed 
to  the  cancellation  of  the  indorser's  signature,  is  bound  thereby  although 
there  is  no  consideration  for  the  cancellation. 

McCormick  v.  Shea,  50  Misc.  592;  Larkin  v.  Hardenbrook,  90  N.  Y. 
333;  Swartzman  v.  Post,  94  App.  Div.  (N.  Y.)  474. 

Subd.  3. — If  the  holder  of  a  note  does  an  act  which  destroys  the 
remedy  of  an  indorser  against  a  maker,  or,  through  inaction,  produces  the 
same  result,  the  indorser  is  discharged. 

Shutts  V.  Fingar,  100  N.  Y.  543;  Spies  v.  National  City  Bank,  174 
N.  Y.  222. 

Where  the  maker  gave  a  chattel  mortgage  as  security  for  the  pay- 
ment of  a  note  and  an  action  was  thereafter  commenced  against  the  maker 
of  the  note  to  foreclose  the  mortgage,  which  action  was  settled,  the  in- 
dorsers were  thereby  discharged. 

Rosenberg  v.  Shoenwald,  126  N.  Y.  Supp.  615. 

Subd.  4. — The  surety  upon  an  undertaking  an  appeal,  given  by  de- 
fendant upon  an  appeal  from  a  judgment  against  him,  who  is  compelled  to 
pay  the  judgment,  is  subrogated  to  all  the  rights  of  the  judgment  creditor 
under  the  judgment  appealed  from,  but  not  to  the  right  of  the  judgment 
creditor  to  enforce  the  liability  of  an  indorser  upon  the  note  on  which  the 
judgment  appealed  from  was  recovered,  who  was  not  sued  and  against 
whom  no  judgment  was  rendered. 

State  Bank  v.  Kahn,  19  Misc.  500. 


DISCHARGE  281 

Where  the  holder  of  a  note,  when  payment  is  tendered  by  the  principal 
debtor  at  the  maturity  of  the  obligation,  accepts  part  of  the  amoimt  due, 
and  with  the  knowledge  of  the  other  makers  are  siireties,  reloans  the  balance 
to  the  principal,  the  stireties  are  thereby  released. 

Spurgeon  v.  Smith,  114  Ind.  453. 

See  also,  Sears  v.  Van  Dusen,  25  Mich.  351;  Donley  v.  Clamp,  22 
Ala.  659;  Joslyn  v.  Eastman,  46  Vt.  258. 

Subd.  5. — A  reservation  of  such  right  of  recourse  cannot  be  implied 
from  the  acts  or  conduct  of  the  parties,  but  must  be  expressly  made;  so 
that,  where  the  payee  of  a  promissory  note  received  a  part  payment  in  full 
settlement  and  indorsed  on  the  note  an  acknowledgement  of  full  settlement 
of  the  liability  of  the  maker,  an  indorser  was  discharged,  although  he 
indorsed  on  the  note  a  consent  to  release  the  maker,  since  the  right  of 
recourse  against  the  indorser  was  not  "expressly  reserved." 

Phoenix  Bank  v.  Hanlon,  183  Mo.  App.  243;  Ziegfried  v.  Stein,  117 
N.  Y.  Supp.  900. 

This  subdivision  has  no  application  where  such  release  is  given  by  the 
holder  at  the  oral  request,  and  with  the  assent  of  the  party  secondarily 
liable,  although  the  instrument  of  release  is  imder  seal  and  contains  no 
reservation  of  any  right  against  the  party  secondarily  liable. 

Arlington  Bank  v.  Bennett,  214  Mass.  353. 

The  unconditional  release  of  one  of  several  joint  and  several  makers 
of  a  promissory  note  without  the  consent  of  the  others  operates  as  a  release 
of  all. 

Hubner  v.  Silver,  124  N.  W.  (Neb.)  148;  McMaster  v.  Bank  of  Lawton, 
101  Pas.  1103. 

A  release  of  the  maker  of  a  promissory  note  without  the  consent  of 
the  indorser  operates  to  release  the  indorser.  But  it  is  held  otherwise  if 
the  instrtiment  by  which  the  maker  is  released  expressly  reserves  the 
remedy  of  the  holder  of  the  note  against  the  indorser.  (Tohey  v.  Ellis, 
114  Mass.  120.)  And  a  covenant  not  to  sue  the  maker,  reserving  all 
rights  against  the  other  parties,  has  been  held  not  to  release  the  indorser. 

Kenworthy  v.  Sawyer,  125  Mass.  28;  Fanueil  Hall  Bank  v.  Meloon, 
183  Mass.  66;  Davis  v.  Gutheil,  87  Wash.  600. 

See  also,  Vanderford  v.  Farmers  Bank,  105  Md.  164;  Osgood  v. 
Miller,  67  Maine  174;  Post  v.  Losey,  111  Ind.  74,  12  N.  E.  121. 

Subd.  6. — The  principle  is  well  settled  that  where  the  holder  of  a 
promissory  note  takes  a  new  note  from  the  debtor,  payable  at  a  future  day, 
he  suspends  the  right  of  action  upon  the  original  demand  until  the  maturity 
of  the  last  mentioned  note,  and  the  surety  upon  the  same  not  assenting 
thereto,  thereby  becomes  discharged  of  Hability. 


282  NEGOTIABLE    INSTRUMENTS    LAW 

Hubbard  v.  Gurney,  64  N.  Y.  457,  466;  Union  Trust  Co.  v.  McCrum, 
145  App.  Div.  409;  see  also,  Bank  v.  Graham,  246  Pa.  St.  256;  Brower 
V.  Carpenter,  50  Misc.  525. 

A  mere  agreement  by  the  holder  of  a  note  to  extend  the  time  of  pay- 
ment and  take  other  notes,  on  condition  that  the  indorser  of  the  original 
note  should  indorse  the  new  one  and  not  otherwise,  which  condition  is  not 
complied  with,  does  not  constitute  an  extension  which  will  release  the 
indorser. 

Jennings  v.  Kosmak,  19  Misc.  433;  see  also.  National  Park  Bank  v. 
Koehler,  121  N.  Y.  Supp.  640;  McCarthy  v.  Kipp,  171  Pa.  644. 

It  will  be  noted  that  this  subdivision  does  not  use  the  words  "Principal 
debtor,"  or  their  equivalent,  the  wording  being,  "by  any  agreement  bind- 
ing upon  the  holder  to  extend  the  time  of  payment."  Does  that  mean  by 
any  agreement  binding  upon  the  holder  made  with  a  stranger  to  the  instru- 
ment, or  must  the  binding  agreement  be  made  with  the  principal  debtor? 

The  question  does  not  seem  to  have  been  passed  upon  since  the  enact- 
ment of  the  statute  in  question  or  of  similar  statutes  in  other  states. 
Brosemer  v.  Brosemer,  162  N.  Y.  Supp.  1067. 

In  the  case  of  National  Park  Bank  v.  Koehler,  204  N.  Y.  at  page  178, 
97  N.  E.  at  page  468,  Judge  Gray  wrote: 

"The  existence  of  the  general  rule  is  not  in  dispute,  if  there  has  been 
an  agreement  by  the  creditor  with  the  principal  debtor,  which  extends 
the  time  of  payment  of  the  debt,  without  the  consent  of  the  surety,  or 
indorser,  the  latter  is  discharged." 

As  stated  by  Judge  Gray,  the  rule  that  applies  to  a  surety  applies 
also  to  an  indorser.     Brandt  on  Suretyship  (3rd  ed.)  Section  3. 

Any  agreement  of  the  creditor  which  operates  to  extend  the  time  of 
pa>Tnent  of  the  original  debt  and  suspends  the  right  to  immediate  action  is 
held  to  discharge  the  non-assenting  indorser  or  surety,  as  the  law  will 
presume  injury  to  him  thereby.  The  creditor  may  arrange  with  his 
debtor  in  any  way  which  does  not  efifect  either  of  these  results,  but  to  pre- 
vent a  discharge  of  the  indorser  or  surety  the  agreement  must  expressly 
reserve  all  the  remedies  of  the  creditor  against  him,  in  which  case  the  latter 
will  be  in  a  position  to  pay  immediately  and  then  proceed. 

National  Park  Bank  v.  Koehler,  204  N.  Y.  174;  Greenberg  v.  Gins- 
berg, 82  Misc.  415;  Moritz  Estate,  239  Penn.  St.  375. 

It  would  seem  that  the  words  of  the  statute,  "agreement  binding  upon 
the  holder,"  should  be  construed  to  mean  an  agreement  binding  upon  the 
holder  made  with  the  principal  debtor. 

Brosmer  v.  Brosmer,  162  N.  Y.  Supp.  1067. 


DISCHAEGE  283 

By  a  valid  agreement  to  give  time  is  meant  an  agreement  for  the 
breach  of  which  the  maker  or  the  acceptor  has  a  remedy,  either  at  law  or 
in  eqtiity. 

Veazie  v.  Carr,  3  Allen  (Mass.)  14. 

It  has  been  said  that  the  statute  in  question  should  be  regarded  simply 
as  a  codification  of  the  common  law. 

Chemical  National  Bank  v.  Kellogg,  183  N.  Y.  98,  75  N.  E.  1103,  2 
L.  R.  A.  (N.  S.)  299,  111  Am.  St.  Rep.  717,  5  Ann.  Cas.  158. 

In  the  case  of  National  Bank  of  Mechanicsburg  v.  Graham,  246  Pa. 
256,  92  Atl.  198,  the  court,  in  writing  of  the  provision  said:  "This  was 
simply  declaratory  of  the  existing  law." 

A  holder  of  a  promissory  note  does  not  discharge  an  indorser  by  merely 
refraining  from  suing  the  maker.  He  may  take  new  security  or  other  notes 
as  collateral  to  the  old  notes,  and  if  time  is  not  given  to  the  maker,  the 
indorser  will  not  be  discharged. 

Riehl  V.  Austin,  155  App.  Div.  (N.  Y.)  208. 

An  agreement  between  the  holder  and  one  ultimately  liable  on  the 
instrument  operates  to  release  parties  who  are  entitled  to  recourse  against 
the  party  ultimately  liable  and  who  do  not  consent  thereto. 

Post  V.  Losey,  111  Ind.  74;  Hagey  v.  Hill,  75  Pa.  St.  108;  Delaware 
Ins.  Co.  V.  Haser,  199  Pa.  St.  17;  Farmers'  Savings  Bank  v.  Arispe,  139 
la.  246;  117  N.  W.  672;  Place  v.  Mellvain,  38  N.  Y.  96. 

Payment  of  a  portion  of  a  note  before  maturity  is  a  sufficient  considera- 
tion for  an  extension  of  time  on  the  balance. 
Bowere  v.  Carpenter,  50  Misc.  525. 

Agreement  between  holder  and  maker  of  notes,  by  which  maker  paid 
a  part  of  the  amount  due  and  executed  new  notes  for  the  balance,  surrender- 
ing the  old  notes,  held  to  discharge  the  indorser,  notwithstanding  a  pro- 
vision that  it  should  not  discharge  the  parties  thereto  from  the  previous 
indebtedness. 

Greenberg  v.  Ginsberg,  82  Misc.  415. 

See  also,  National  Citizens'  Bank  v.  Toplitz,  178  N.  Y.  464;  Pomeroy 
V.  Tonner,  70  N.  Y.  547;  State  Bank  v.  Williams,  164  Ky.  146. 

§  202.  Right  of  party  who  discharges  instrument.  Where 
the  instrument  is  paid  by  a  party  secondarily  liable  thereon, 
it  is  not  discharged;  but  the  party  so  paying  it  is  remitted  to 
his  former  rights  as  regards  all  prior  parties,  and  he  may  strike 
out  his  own  and  all  subsequent  indorsements,  and  again  nego- 
tiate the  instniment,  except: 


284  NEGOTIABLE    INSTRUMENTS   LAW 

1 .  Where  it  is  payable  to  the  order  of  a  third  person,  and 
has  been  paid  by  the  drawer ;  and 

2.  Where  it  was  made  or  accepted  for  accommodation, 
and  has  been  paid  by  the  party  accommodated. 

The  words  "remitted  to  his  former  rights"  does  not  apply  to  a  stranger 
who  indorses  a  note  for  accommodation  only  and  pays  the  same. 

Lill  V.  Gleason,  92  Kans.  758,  142  Pac.  287;  Noble  v.  Beeman  Co., 
131  Pac.  (Or.)  1006;  46  L.  R.  A.  162;  Quinby  v.  Vamimi,  190  Mass.  211. 

Subd.  I. — ^The  possession  of  a  promissory  note  by  an  indorser,  after 
its  protest  for  nonpayment,  is  prima  facie  evidence  that  he  has  performed 
his  contract  of  indorsement  and  has  paid  the  holder  the  amount  due  upon 
the  note. 

Hill  V.  Buchanan,  71  N.  J.  L.  301. 

Where  a  second  indorser  of  a  promissory  note  has  paid  and  taken  it 
up,  he  became  a  holder  for  value  and  may  maintain  an  action  to  recover 
the  amount  thereof  of  the  first  indorser,  although  both  are  accommodation 
indorsers. 

Kelly  V.  Burroughs,  102  N.  Y.  93. 

Payment  of  a  note  in  whole  or  in  part  by  one  secondarily  liable  thereon 
does  not  discharge  the  obHgation  of  the  maker. 

Assets  Co.  V.  Mercantile  National  Bank,  167  App.  Div.  761;  Twelfth 
Ward  Bank  v.  Brooks,  63  App.  Div.  221,  Subd.  1. 

Where  the  consideration  for  which  one  signed  a  check  obtained  from 
him  by  false  pretenses  never  passed  to  him,  the  one  so  obtaining  the  check 
is  primarily  Hable  to  an  indorsee;  and  payment  by  him  to  the  indorsee 
discharges  the  check  as  against  all  the  parties. 

Josephenson  v.  Gens,  85  Misc.  372. 

Subd.  2. — Where  the  consideration  for  which  one  signed  a  check 
obtained  from  him  by  false  pretenses  never  passed  to  him,  the  one  so 
obtaining  the  check  is  primarily  liable  to  an  indorsee;  and  payment  by  him 
to  the  indorsee  discharges  the  check  against  all  parties. 

Josephsohn  v.  Gens,  85  Misc.  372. 

This  section  is  without  application  to  one  who  indorses  the  note 
payable  to  a  third  person  before  delivery  to  the  payee,  and  subsequently 
pays  the  note,  and  the  pa>Tnent  by  such  indorser  extinguishes  the  note, 
and  it  cannot  be  again  transferred  or  made  the  basis  of  an  action. 

Quimby  v.  Vamum,  76  N.  E.  (Mass.)  671. 

Where  one  of  several  accommodation  makers  of  a  joint  and  several 
promissory  note  paid  the  same,  and  subsequently  transferred  and  delivered 
it  for  a  valuable  consideration  to  a  third  person  held,  that,  although  the 


DISCHAEGE  285 

note  as  an  obligation,  was  extinguished  by  the  payment,  yet  it  remained 
in  the  hands  of  the  maker,  who  paid  it,  the  evidence  of  his  right  of  con- 
tribution from  his  co-sureties ;  and  that  the  delivery  raised  a  legal  presump- 
tion of  an  intent  to  pass  and  did  pass  the  rights  to  the  transferee. 

Dillenbeck  v.  Dygert,  97  N.  Y.  303. 

The  contract  of  an  accommodation  indorser  of  a  note  is  wholly  inde- 
pendent of  that  of  the  maker,  and  such  indorser,  upon  making  payment, 
succeeds  to  the  title  and  rights  of  the  holder  as  against  the  maker. 

Lill  V.  Gleason,  92  Kans.  757. 

§  203.  Renunciation  by  holder.  The  holder  may  ex- 
pressly renounce  his  rights  against  any  party  to  the  instru- 
ment, before,  at  or  after  its  maturity.  An  absolute  and  un- 
conditional renunciation  of  his  rights  against  the  principal 
debtor  made  at  or  after  the  maturity  of  the  instrument,  dis- 
charges the  instrument.  But  a  renunciation  does  not  afifect 
the  rights  of  a  holder  in  due  course  without  notice.  A  re- 
nunciation must  be  in  writing,  unless  the  instrument  is  de- 
livered up  to  the  person  primarily  liable  thereon. 

The  term  "renunciation"  describes  the  act  of  surrendering  a  right  or 
claim  without  recompense,  but  it  can  be  applied  with  equal  propriety  to 
the  relinquishment  of  a  demand  upon  an  agreement  supported  by  a  con- 
sideration. The  term  as  used  includes  the  release  of  a  claim  by  virtue  of 
an  accord  and  satisfaction,  as  well  as  a  gratuitous  waiver  of  liability. 

Whitcomb  v.  National  Ex.  Bank,  123  Md.  612. 

Where  after  a  testator's  death  there  is  found  among  his  papers  a  note 
payable  to  him  and  addressed  to  his  executors,  stating  "Gentlemen,  the 
enclosed  note  I  wish  to  be  cancelled  in  case  of  my  death,  and  if  the  law 
does  not  allow  it,  I  wish  you  to  notify  my  heirs  that  it  is  my  wish  and 
orders."  Such  instrument  is  not  effective  to  prevent  the  executors  from 
enforcing  such  note,  as  it  does  not  comply  with  this  section. 

Leask  v.  Dew,  102  App.  Div.  (N.  Y.)  529,  184  N.  Y.  599. 

In  Dimon  v.  Keery,  54  App.  Div.,  under  almost  similar  state  of 
facts  the  court  said:  "It  is  manifest  that  the  declaration  upon  the  note 
was  not  a  renunciation  of  the  liability  of  the  maker  during  the  lifetime  of 
the  deceased,  or  any  renunciation  of  the  obligation  of  the  instnmient, 
and  as  it  did  not  constitute  a  gift  or  an  agreement,  it  neither  fell  within 
the  terms  of  the  statute  nor  exempted  the  defendant  from  liability 
thereon." 

For  cases  under  the  Bill  of  Exchange  Act,  which  in  character  and  im- 
port is  like  this  section,  see: 


286  NEGOTIABLE    INSTRUMENTS    LAW 

Matter  of  George,  L.  R.  44  Ch.  Div.  627. 

This  section  plainly  provides  that  the  renunciation  of  a  debt  must  be 
hi  writing  where  the  debt  is  evidenced  by  a  negotiable  instrument,  and  if 
"renunciation"  is  used  therein  in  the  sense  of  a  "release"  there  can  be  no 
question  but  what  a  written  renunciation  is  necessary. 

Trudeaux  v.  American  Mills,  83  Pac.  725. 

The  holder  and  owner  of  a  negotiable  promissory  note  may  covenant 
with  the  maker  not  to  sue  and  reserve  his  rights  against  the  indorsers. 

Faniul  Hall  Bank  v.  Meloon,  183  Mass.  67. 

Under  this  section  a  release  of  an  indorser  by  a  transaction  amounting 
to  an  accord  and  satisfaction  can  only  be  proved  by  a  renunciation  in  writ- 
ing, notwithstanding  Section  201  designating  the  acts  which  will  discharge 
an  instrument. 

Whitcomb  v.  National  Exchange  Bank,  123  Md.  612;  91  Atl.  689. 

§  204.  Cancellation;  unintentional;  burden  of  proof.     A 

cancellation  made  unintentionally,  or  under  a  mistake,  or 
without  the  authority  of  the  holder,  is  inoperative;  but  where 
an  instrument  or  any  signatiu-e  thereon  appears  to  have  been 
cancelled  the  burden  of  proof  lies  on  the  party  who  alleges  that 
the  cancellation  was  made  unintentionally,  or  under  a  mistake 
or  without  authority. 

Some  time  after  the  making  of  a  note,  the  maker  and  indorsers  thereof, 
with  one  exception,  but  without  the  authority  or  knowledge  of  the  board 
of  directors  of  the  bank,  substituted  for  it  their  individual  notes  for  equal 
sums  amounting  in  the  aggregate  to  the  total  of  the  note  for  which  they 
were  substituted.  Held,  that  such  substitution  was  unauthorized  and 
therefore  inoperative. 

Union  Bank  v.  Sullivan,  214  N.  Y.  332. 

Where  the  holder  of  a  promissory  note  voluntarily  cancels  the  same 
and  surrenders  it  to  the  maker,  this,  although  no  consideration  was  paid, 
in  the  absence  of  fraud  or  mistake,  operates  in  law  as  a  release  and  dis- 
charges the  maker's  liability. 

Larkin  v.  Hardenbrook,  90  N.  Y.  333;  Kent  v.  Reynolds,  8  Hun.  559; 
Jaffrey  v.  Davis,  124  N.  Y.  164,  170. 

In  an  action  upon  a  note,  the  fact  of  erasing  the  indorser 's  name  was 
made  by  his  representative  in  the  plaintiff's  presence,  is  a  fact  which  the 
jury  may  consider  in  determining  whether  the  cancellation  was  author- 
ized or  consented  to  as  claimed  by  the  respective  parties. 

McCormick  v.  Shea,  50  Misc.  592;  Schwartzman  v.  Post,  94  App. 
Div.  474. 


DISCHAEGE  287 

Burden  of  proof. — See  Lorenz  v.  Jackson,  88  Hun.  202;  Clinton  v. 
Frear,  107  App.  Div.  571;  McCormick  v.  Shea,  50  Misc.  594;  National 
Bank  v.  Gridley,  112  App.  Div.  403;  Gilley  v.  Harrell,  118  Tenn.  116. 

§  205.  Alteration  of  instrument;  effect  of.  Where  a 
negotiable  instrument  is  materially  altered  without  the  assent 
of  all  parties  liable  thereon,  it  is  avoided,  except  as  against  a 
party  who  has  himself  made,  authorized  or  assented  to  the 
alteration  and  subsequent  indorsers.  But  when  an  instru- 
ment has  been  materially  altered  and  is  in  the  hands  of  a 
holder  in  due  course,  not  a  party  to  the  alteration,  he  may 
enforce  payment  thereof  according  to  its  original  tenor. 

Variant. — The  Illinois  statute  adds  the  words  "fraudulently  or" 
before  "materially"  in  the  first  line.  The  Wisconsin  statute  adds  "orally 
or  in  writing"  after  "assented"  in  the  first  subdivision. 


See  notes  Section  33. 

"Subsequent  indorsers"  as  used  in  the  section  mean  those  who  indorse 
subsequent  to  the  alteration. 

First  National  Bank  v.  Gridley,  112  App.  Div.  (N.  Y.)  402. 

Any  alteration  of  a  written  contract,  which  may  in  any  event  change 
the  rights,  duties  or  obligations  of  the  party  sought  to  be  charged,  is  material 
regardless  of  whether  the  alteration  is  beneficial  or  prejudicial  to  him. 

Barton  Bank  v.  Stephenson,  87  Vt.  433;  Green  v.  Sneed,  101  Ala. 
205,  13  South  277;  Aldrich  v.  Smith,  26  Am.  Rep.  (Mich.)  536;  Eckert 
V.  Pickel,  13  N.  W.  (la.)  708. 

The  indorser  of  a  promissory  note,  the  amount  of  which  has  been 
fraudulently  raised  after  indorsement,  is  not  liable  upon  the  instrument, 
in  the  hands  of  a  bona  fide  holder,  for  the  increased  amoimt,  because  of 
negligence  in  indorsing  the  same  when  there  were  spaces  thereon  which 
made  the  forgery  easy,  though  the  note  was  complete  in  form.  No  liability 
on  the  part  of  the  indorser  for  the  amount  of  such  a  note  can  be  predicated 
simply  upon  the  fact  that  such  spaces  existed  thereon. 

National  Exchange  Bank  v.  Lester,  194  N.  Y.  464. 

In  Hackett  v.  Bank  of  Louisville,  114  Ky.  193,  the  contrary  was  held 
on  the  ground  that  proper  precaution  had  not  been  exercised. 

Where  there  is  nothing  suspicious  upon  the  face  of  an  instrument 
beyond  the  fact  that  an  erasure  is  manifest,  the  presumption  is  that  any 
alteration  appearing  on  the  face  thereof  was  made  before  the  execution 
of  the  instrument. 

Ensign  v.  Fogg,  177  Mich.  318. 


288  NEGOTIABLE    INSTKUMENTS    LAW 

The  banker  is  presumed  to  know  the  signature  of  his  depositor  and  if 
he  pays  a  forged  check  he  cannot  charge  the  amount  to  his  account.  If  a 
check  plainly  appears  to  have  been  altered  the  banker  is  put  on  enquiry 
as  to  the  correctness  of  the  alteration  and  he  pays  it  at  his  own  peril. 
Where,  however,  the  alteration  is  such  as  to  excite  no  suspicion  because 
the  check  has  been  drawn  by  the  maker  in  such  a  way  as  to  invite  an 
unsuspicious  alteration,  the  law  makes  an  exception  to  the  rule  that  the 
banker  pays  at  his  own  peril  and  permits  him  to  assert  negligence  on  the 
part  of  the  maker  in  so  drawing  his  check. 

Otis  Elevator  Co.  v.  National  Bank,  124  Pac.  Rep.  704;  Timbel  v. 
Garfield  National  Bank,  121  App.  Div.  872;  Oppenheimer  v.  W.  S.  Bank, 
22  Misc.  722. 

In  Greenfield  Savings  Bank  v.  Stoll,  123  Mass.  196;  it  is  held 
that  the  above  principle  did  not  apply  to  a  note,  because  the  maker  of  a 
promissory  note  held  no  such  relation  to  the  endorsees  as  does  a  depositor 
to  his  banker.  On  the  other  hand  the  Pennsylvania  and  Illinois  Courts 
apply  the  principle  to  negligently  drawn  notes  as  well  as  to  checks. 

Gerard  v.  Haddan,  67  Pa.  St.  82;  Leas  v.  Walls,  102  id.  57;  Harvey  v. 
Smith,  55  111.  224. 

While  the  drawer  of  a  check  may  be  liable  where  he  draws  the  instru- 
ment in  such  an  incomplete  state  as  to  invite  fraudulent  alterations,  it  is 
not  the  law  that  he  is  bound  to  prepare  the  check  that  nobody  else  can 
successfully  tamper  with  it. 

Critten  v.  Chemical  National  Bank,  71  N.  Y.  219;  Mitchell  v.  Security 
Bank,  147  N.  Y.  Supp.  470. 

The  drawer  is  bound  for  the  whole  amount  if  his  own  negligence  has 
facilitated  or  invited  the  fraud  done  by  raising  the  check. 

Bank  of  Commerce  v.  Union  Bank,  3  N.  Y.  230;  2  Dan.  Neg.  Int. 
(2nd  ed.)  608;  I.  C.  Bank  v.  F.  P.  Bank,  159  Pa.  St.  47;  Elias  v.  Whitney, 
50  Misc.  326. 

The  bank  is  not  responsible  if  the  depositor  has  been  negligent  in 
examining  his  accounts  and  vouchers. 

Meyers  v.  S.  National  Bank,  44  Atl.  Rep.  280;  L.  M.  Bank  v.  Morgan, 
117  U.  S.  96;  Crawford  v.  W.  S.  Bank,  100  N.  Y.  50;  Weinstein  v.  National 
Bank,  69  Texas  38;  Dana  v.  National  Bank,  132  Mass.  156;  National 
Bank  v.  Allen,  100  Ala.  476;  Critten  v.  Chemical  National  Bank,  171  N.  Y. 
219;  Continental  Bank  v.  Metropolitan  Bank,  107  111.  455. 

As  to  the  diligence  required  in  the  examination  of  the  returned 
vouchers  see.  Leather  Mfrs.  Bank  v.  Richmond  Co.,  117  U.  S.  96;  Morgan 
V.  U.  S.  Mortgage  Co.,  208  N.  Y.  218;  Scanlon  Lumber  Co.  v.  Germania 
Bank,  97  N.  W.  (Minn.)  380;  Kenneth  Co.  v.  National  Bank,  77  S.  W. 
(Mo.)  1002. 


DISCHARGE  289 

In  Garrard  v.  Haddan,  67  Pa.  St.  82,  a  space  was  left  between  the 
words  "one  hundred"  and  the  word  "dollars"  in  which  "fifty"  had  been 
inserted  after  the  maker  had  signed  and  delivered  it;  and  the  Court  held 
the  maker  answerable  to  a  bone  fide  holder  for  the  full  face  of  the  note  as 
altered  on  the  ground  of  the  negligence  of  the  maker  in  leaving  the  space 
in  the  note  which  was  thus  filled  up  after  execution.  "We  think  this  rule 
is  necessary,"  said  Chief  Justice  Thompson,  "to  facilitate  the  circulation 
of  commercial  paper  and  at  the  same  time  increase  the  care  of  drawers  and 
acceptors  of  such  paper,  and  also  of  bankers,  brokers  and  others  in  taking 
it."  It  is  a  little  difficult  to  see  how  the  rule  tends  to  make  bona  fide 
purchasers  more  careful,  as  this  last  observation  suggests. 

The  case  of  Yoctmi  v.  Smith,  63  111.  321 ;  held  the  maker  liable  upon  a 
note  which  had  been  raised  after  execution  from  one  hundred  dollars  to  one 
hundred  and  twenty  dollars,  the  words  "and  twenty"  having  been  inserted 
in  a  space  left  between  the  word  "hundred"  and  the  word  "dollars."  The 
Court  said  that  the  maker  had  acted  with  unpardonable  negligence  in 
signing  the  note  and  leaving  a  blank  which  could  so  easily  be  filled;  that 
he  has  thus  placed  it  in  the  power  of  another  to  do  an  injury  and  that  he 
must,  therefore,  suffer  the  resulting  loss.  It  appeared  that  the  maker 
there  was  informed  by  letter  by  the  purchaser,  very  soon  after  the  date  of 
the  note,  that  he  had  bought  it  and  of  its  date  and  amount;  yet  he  made 
no  objection  as  to  the  amount  until  nearly  a  year  later. 

In  Scotland  Co.  National  Bank  v.  O'Connel,  23  Mo.  App.  165,  the 
defendants  executed  and  delivered  a  note  for  $100  to  one  Smith,  the  body 
of  which  was  in  his  handwriting,  in  a  condition  which  enabled  him  to  add 
the  words  "thirty-five"  after  "one  hundred"  in  the  written  part  and  put 
the  figures  "135"  at  the  head  of  the  note  in  the  space  where  the  amount 
is  usuall}^  indicated  by  figures.  The  St.  Louis  Court  of  Appeals  held  that 
the  defendants  were  liable  for  $135,  because  they  had  delivered  the  note 
to  Smith,  who  was  their  co-maker,  "in  such  a  condition  as  to  enable  him 
to  fill  the  blank  space  without  in  any  manner  changing  the  appearance  of 
the  note  as  a  genuine  instrument." 

The  cases  above  cited  were  all  of  them  actions  against  the  makers  of 
the  raised  paper.  The  same  rule,  however,  was  applied  against  an  indorser 
in  Isnard  v.  Torres  &  Marquez,  10  La.  Ann.  103. 

To  the  same  effect  is  Hackett  v.  First  National  Bank  of  Louisville, 
114  Ky.  193,  where  it  was  held  that  a  surety  who  had  signed  a  note  in 
which  were  written  the  words  "five  hundred"  with  spaces  before  and  after 
them,  which  the  maker  had  filled  up  by  writing  "twenty"  before  and  "fifty" 
after  them,  thereby  making  a  note  for  $2,550,  was  liable  thereon  to  a  pur- 
chaser in  good  faith.  In  this  case  the  attention  of  the  Kentucky  Coiirt 
of  Appeals  was  called  to  the  fact  that  the  great  weight  of  authority  was 


290  NEGOTIABLE    INSTRUMENTS    LAW 

the  other  way,  but  in  view  of  the  fact  that  the  rule  had  been  so  estabhshed 
in  Kentucky  for  a  quarter  of  a  century  the  Court  determined  to  adhere 
to  it,  in  observance  of  the  principle  of  stare  decisis. 

Where  negotiable  paper  has  been  executed  with  the  amount  blank,  it 
is  no  defense  against  a  bona  fide  holder  for  value  for  the  maker  to  show 
that  his  authority  has  been  exceeded  in  filling  such  blank,  and  a  greater 
amount  written  than  was  intended.  This  was  also  once  held  to  be  the 
nile  where  no  blank  had  been  actually  left,  but  the  maker  had  negligently 
left  a  space  either  before  or  after  the  written  amoimt  which  made  it 
easier  for  a  holder  fraudulently  to  enlarge  the  sum  first  written.  "It  has 
now,  however,  become  in  America  an  established  rule  that  if  the  instru- 
ment was  complete  without  blanks  at  the  time  of  its  delivery,  the  fraudulent 
increase  of  the  amoimt  by  taking  advantage  of  a  space  left  without  such 

intention will  constitute  a  material  alteration  and  operate  to 

discharge  the  maker." 

1  Randolph  on  Commercial  Paper,  187.  Usefoff  v.  Herzenstein,  65 
Misc.  45. 

The  rule  thus  stated  is  sustained  by  the  decisions  of  the  courts  of  last 
resort  in  Massachusetts,  Michigan,  New  Hampshire,  New  York,  Iowa, 
Maryland,  Mississippi,  Arkansas  and  South  Dakota. 

The  leading  case  sustaining  this  view  is  Greenfield  Savings  Bank  v. 
Stowell  (123  Mass.  196), in  which  the  opinion  was  written  by  Chief  Justice 
Gray,  afterward  an  Associate  Justice  of  the  Supreme  Court  of  the  United 
States.  The  discussion  is  careful  and  exhaustive,  reviewing  all  the  import- 
ant cases  in  England  and  America  bearing  upon  the  subject  which  had  been 
decided  up  that  time  (1877). 

A  bank  may  only  pay  out  the  ftmds  of  a  depositor  in  conformity  to 
his  directions;  it  is  not  entitled  to  charge  to  him  checks  presented  which 
have  been  altered  in  a  material  point  without  his  consent,  even  if  done  so 
skillfully  as  to  defy  detection,  and  the  bank  is  responsible  for  an  omission 
to  discover  the  original  terms  and  conditions  thereof.  The  change  of  the 
date  of  an  instrimient,  whereby  the  time  is  accelerated,  is  a  material 
alteration,  and  when  made  without  the  consent  of  the  maker,  destroys  its 
validity. 

Crawford  v.  W.  S.  Bank,  100  N.  Y.  50;  National  Exchange  Bank  v. 
Lester,  194  N.  Y.  461;  Chicago  Savings  Bank  v.  Block,  126  111.  App.  128; 
Morris  V.  Beaumont  Bank,  37  Tex.  Civ.  97;  83  S.  W.  Rep.  36. 

So  also  by  adding  the  words:  "with  interest." 

Columbia  Dis.  Co.  v.  Rech,  151  App.  Div.  (N.  Y.)  128;  Broadway 
National  Bank  v.  Hefferman,  220  Mass.  247. 

Where  the  cashier  of  a  bank  changed  the  name  of  the  bank  where 
the  check  was  made  payable,  where  the  drawer  made  a  mistake  in  drawing 


DISCHABGE  291 

it  on  the  wrong  bank  and  should  have  been  drawn  as  altered,  it  was  held 
that  such  alteration  made  the  check  void. 

Whitset  V.  People's  Bank,  119  S.  W.  (Mo.)  999. 

An  alteration  which  is  not  material  does  not  invalidate  the  instrument. 

Gleason  v.  Hamilton,  138  N.  Y.  353;  Condict  v.  Flower,  106  111.  105; 
Nickerson  v.  Sweet,  135  Mass.  514;  Colonial  Bank  v.  Duerr,  108  App. 
Div.  (N.  Y.)  217;  Levy  v.  Arons,  81  Misc.  165;  Booth  v.  Powers,  56  N.  Y. 
22,  31. 

The  words  "with  the  privilege  of  renewal  for  one  year"  written  in 
the  body  of  a  note  after  delivery  and  negotiated  to  another  without  notice 
of  the  change,  it  was  held  that  if  such  alteration  had  been  made  by  the 
plaintiff  after  delivery  and  it  was  found  to  be  material,  the  defendant 
would  have  been  relieved  from  the  performance  of  his  promise.  But  if 
deemed  immaterial  he  would  have  been  held  liable. 

Thorpe  v.  White,  188  Mass.  834. 

Where  upon  false  representation  of  the  payee  of  defendant's  check 
that  he  had  lost  it,  a  new  check  is  given  and  cashed,  defendants  under  this 
section  are  liable  to  an  innocent  holder  in  due  course  of  the  first  check,  the 
date  of  which  had  been  altered  by  the  payee. 

Moskowitz  V.  Deutsch,  40  Misc.  603;  Andrus  v.  Bradley,  102  Fed. 
Rep.  54;  Mass.  National  Bank  v.  Snow,  187  Mass.  159;  Thorpe  v.  White, 
188  Mass.  333;  74  N.  E.  592. 

Authority  to  fill  blank  space  in  a  negotiable  instrument  does  not 
justify  changing  or  altering  another  place,  and  an  indorser  having  notice 
of  such  alteration  could  not  be  a  holder  in  due  course,  and  even  though  he 
paid  value  he  could  not  recover  according  to  the  original  tenor. 

Bank  v.  Barnum,  160  Fed.  Rep.  245. 

A  material  alteration  of  a  written  instrument  by  a  party  to  it  discharges 
a  party  who  does  not  authorize  or  consent  to  the  alteration,  because  it 
destroys  the  identity  of  the  contract,  and  substitutes  a  different  agree- 
ment for  that  which  he  entered.  In  the  application  of  this  rule,  it  is  not 
only  well  settled  that  a  material  alteration  of  a  promissory  note  by  the 
payee  or  holder  discharges  the  maker,  even  as  against  subsequent  innocent 
indorsee  for  value,  but  it  has  been  adjudged  that  a  material  alteration  of  a 
note  before  its  delivery  to  the  payee  by  one  of  two  joint  makers,  without 
the  consent  of  the  other,  makes  it  void  as  to  him. 

Mersman  v.  Werges,  112  U.  S.  141;  Pensacola  Bank  v.  Melton,  210 
Fed.  57. 

An  indorser  of  a  note  who  admits  the  note,  but  alleges  that  it  was 
altered  after  his  indorsement  and  diverted,  must  establish  this  by  affirma- 
tive defense,  as  well  as  notice  to  the  holder  of  such  diversion,  and  he  should 
be  permitted  to  do  so. 


292  NEGOTIABLE   INSTRUMENTS   LAW 

Mutual  Loan  Assn.  v.  Lesser,  76  App.  Div.  614. 

By  virtue  of  this  statute,  a  party  to  a  negotiable  instrument  must 
respond  to  "a  holder  in  due  course"  upon  the  obligation  which  he  in  truth 
assumed,  notwithstanding  the  fact  that  the  instrument  may  have  been 
changed  so  as  to  import  a  different  obligation. 

Ensign  v.  Fogg,  177  Mich.  317,  143  N.  W.  82;  Voris  v.  Anderson 
(Okl.)  153  Pac.  291;  Zehr  v.  Champlain  (Okl.)  159  Pac.  1185;  Thorpe  v. 
White,  188  Mass.  333,  74  N.  E.  592;  Massachusetts  National  Bank  v. 
Snow,  187  Mass.  159,  72  N.  E.  959;  National  Exchange  Bank  v.  Lester, 
194  N.  Y.  461,  87  N.  E.  779,  21  L.  R.  A.  (N.  S.)  402,  16  Ann.  Cas.  770; 
Moskowitz  v.  Deutsch,  46  Misc.  Rep.  603,  92  N.  Y.  Supp.  721;  Mutual 
Loan  Ass'n  v.  Lesser,  76  App.  Div.  614,  78  N.  Y.  Supp.  629;  Diamond  Dis- 
tilleries Co.  V.  Gott,  137  Ky.  585,  126  S.  W.  131,  31  L.  R.  A.  (N.  S.)  643; 
Bothell  V.  Schweitzer,  84  Neb.  271,  120  N.  W.  1129,  23  L.  R.  A.  (N.  S.) 
263,  133  Am.  St.  Rep.  623. 

§  2o6.  What  constitutes  a  material  alteration.        Any 

alteration  which  changes: 

1.  The  date; 

2.  The  sum  payable,  either  for  principal  or  interest; 

3.  The  time  or  place  of  payment; 

4.  The  number  or  the  relations  of  the  parties; 

5.  The  medium  or  currency  in  which  payment  is  to  be 
made; 

Or  which  adds  a  place  of  payment  where  no  place  of  pay- 
ment is  specified,  or  any  other  change  or  addition  which  alters 
the  effect  of  the  instrument  in  any  respect,  is  a  material 
alteration. 

Subd.  I. — See  notes  to  Sections  33  and  205;  Moskowitz  v.  Deutsch, 
40  Misc.  603;  National  Ulster  Co.  Bank  v.  Madden,  114  N.  Y.  280. 

Where  a  party  to  a  negotiable  instniment  intrusts  it  to  another  for 
use  as  such  with  blanks  not  filled,  it  carries  on  its  face  an  implied  authority 
to  complete  it  by  filling  them,  but  not  to  vary  or  altering  the  date  or  other 
material  terms,  by  erasing  what  is  written  or  printed  as  a  part  thereof,  nor 
to  pervert  its  scope  or  meaning  by  filling  the  blanks  with  stipulations 
repugnant  to  what  was  plainly  expressed  in  the  instrument. 

Angel  V.  N.  W.  Mutual  Life  Ins.  Co.,  69  Mo.  554. 

The  change  of  date  of  an  instrument,  whereby  the  time  of  payment 
is  accelerated,  is  a  material  alteration,  and  when  made  without  the  consent 
of  the  maker  destroys  its  validity. 


DISCHARGE  293 

Crawford  v.  W.  S.  Bank,  100  N.  Y.  51;  Eastman  v.  Shaw,  65  N.  Y. 
522;  Miller  v.  Gilleland,  9  Penn.  St.  119;  Hervey  v.  Harvey,  15  Me.  357. 

Subd.  2. — See  Birmingham  Trust  Co.  v.  Whitney,  95  App.  Div. 
(N.  Y.)  280;  Colonial  National  Bank  v.  Duerr,  108  App.  Div.  215. 

Where  the  payee  of  a  note  without  interest  adds  the  words  "with 
interest"  without  the  knowledge  or  consent  of  the  maker,  there  is  an  altera- 
tion within  the  meaning  of  this  section,  and  not  only  vitiates  the  note  but 
extinguishes  the  original  indebtedness. 

Columbia  Dis.  Co.  v.  Rech,  151  App.  Div.  (N.  Y.)  128;  Meyer  v. 
Huneke,  55  N.  Y.  419;  Farmers'  National  Bank  v.  Auto  Co.,  79  Hun.  595; 
Dumbrow  v.  Gelb,  72  Misc.  400;  McGrath  v.  Clark,  56  N.  Y.  34;  Broad- 
way National  Bank  v.  Hefferman,  220  Mass.  247. 

The  reason  of  the  law  imposing  the  forfeiture  of  the  debt  itself  upon 
one  who  tampers  with  the  instrument  is  upon  the  principle  that  "no  man 
should  be  permitted  to  take  the  chance  of  gain  by  the  commission  of  a 
fraud,  without  running  the  risk  of  loss  in  case  of  detection." 

Dan.  Neg.  Inst.  (5th  ed.).  Section  1410a. 

Subd.  3.— See,  Troy  City  Bank  v.  Lauman,  19  N.  Y.  480;  Walker  v. 
Bank  of  New  York,  13  Barb.  636;  Melton  v.  Pensacola  Bank,  190  Fed.  134. 

There  is  no  question  that  the  change  in  the  place  where  a  note  is  made 
payable  is  a  material  alteration  which  releases  an  indorser  unless  it  is  done 
with  his  assent. 

First  National  Bank  v.  Barnum,  160  Fed.  250;  2  Am.  &  Eng.  Ency.  of 
Law,  253;  Simpson  v.  Bovard,  74  Pa.  351 ;  Angel  v.  N.  W.  M.  Life  Ins.  Co., 
92  U.  S.  330. 

The  omission  of  the  place  of  payment,  there  being  nothing  in  the  frame 
of  the  instnmient  to  indicate  that  the  one  which  was  subsequently  inserted 
was  intended,  is  not  enough  in  itself  to  raise  an  inference  of  authority  to  do 
so,  such  a  clause  not  being  necessary  to  the  completeness  of  the  instrument. 

McCoy  V.  Lockwood,  71  Ind.  319;  Toomer  v.  Rutland,  57  Ala.  379; 
McGrath  v.  Clark,  56  N.  Y.  34. 

Subd.  4. — The  holder  of  a  promissory  note,  without  the  knowledge 
or  consent  of  the  indorser,  procured  a  third  person  to  sign  it  for  the  purpose 
of  adding  to  their  security.  The  subscription  was  the  same  in  form  as  if 
he  had  been  the  original  maker.  This  is  not  such  an  alteration  as  to  vitiate 
the  note  and  discharge  the  indorser. 

McGaughey  v.  Smith,  27  N.  Y.  39;  Hoffman  v.  Planters'  Bank,  99 
Va.  480. 

The  indorsement  of  all  the  payees  of  a  promissory  note  is  necessary 
to  give  good  title  to  the  transferee,  and  hence  an  indorser  of  a  note  made 
payable  to  several  payees  is  not  liable  to  a  transferee  thereof  when  the 


294  NEGOTIABLE    INSTKUMENTS   LAW 

maker,  without  authority  from,  or  knowledge  of  the  indorser,  has  altered 
the  note  before  negotiation  by  striking  out  the  name  of  one  payee  and 
substituting  his  own  name  as  payee  thereon. 

First  National  Bank  v.  Gridley,  112  App.  Div.  (N.  Y.)  398. 

An  alteration  which  changes  the  effect  of  the  instrument  in  any 
respect  is  a  "material  alteration."  A  change  in  a  note  payable  to  order, 
made  by  striking  out  the  words  "order  of"  and  inserting  after  the  name  of 
the  payee  the  words  "or  bearer,"  is  a  material  alteration,  which  invalidates 
the  instrument  if  made  after  delivery,  or,  if  made  by  the  maker  of  the 
payee  before  delivery,  discharges  a  surety. 

Builders  v.  Weimer,  151  N.  W.  Rep.  100;  Needles  v.  Shaffer,  60  la. 
65;  Croswell  v.  Labree,  81  Me.  44;  Booth  v.  Powers,  56  N.Y.  22;  Weaver 
V.  Bromley,  65  Mich.  212;  Draper  v.  Wood,  112  Mass.  315;  McGrath  v. 
Clark,  56  N.  Y.  34;  2  Dan.  Neg.  Int.,  Section  373a. 

A  change  of  the  pronoun  "I"  to  "we"  in  a  promissory  note  is  a  material 
alteration,  since  it  changes  the  obligation  from  a  joint  and  several  to  a 
joint  obligation. 

Humphrey  v.  Guillon,  13  N.  H.  385. 

Subd.  5.— See  Angel  v.  Insiirance  Co.,  92  U.  S.  330. 

Last  subdivision. — A  lead  pencil  entry  on  the  back  of  a  promissory 
note  beneath  the  indorser's  signature  of  the  words  "Glens  Falls,  N.  Y." 
made  by  the  manager  of  the  bank  for  the  purpose  of  aiding  its  clerk  in  keep- 
ing the  bank  records,  does  not  constitute  an  alteration  which  will  relieve 
the  indorser  from  liability. 

Merchants'  Bank  v.  Brown,  86  App.  Div.  599;  Struthers  v.  Kendall, 
41  Penn.  St.  214;  Daniel  Neg.  Inst.  (5th  ed.)  1399. 


BILLS  OF  exchange;  form  and  interpretation  295 

ARTICLE  II 
Bills  of  Exchange;  Form  and  Interpretation 

Section  210.  Bill  of  exchange  defined. 

211.  Bill  not   an   assignment   of  funds  in  hands  of 

drawee. 

212.  Bill  addressed  to  more  than  one  drawee. 

213.  Inland  and  foreign  bills  of  exchange. 

214.  When  bill  may  be  treated  as  promissory  note. 

215.  Referee  in  case  of  need. 

§  210.  Bill  of  exchange  defined.  A  bill  of  exchange  is 
an  unconditional  order  in  writing  addressed  by  one  person  to 
another,  signed  by  the  person  giving  it,  requiring  the  person  to 
whom  it  is  addressed  to  pay  on  demand  or  at  a  fixed  or  deter- 
minable future  time  a  simi  certain  in  money  to  order  or  to 
bearer. 

Bill  of  Exchange. 


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Bill  of  exchange  is  usually  drawn  against  commodities  sold  and 
delivered  or  about  to  be  delivered  by  the  drawer  to  the  drawee,  but  this 
is  not  necessarily  so.  It  is  usually  drawn  against  a  deposit  of  money, 
although  it  may  be  drawn  and  accepted  as  an  accommodation  by  the 
drawee.     Until  a  bill  of  exchange  is  accepted  the  drawer  is  as  between  the 


296  NEGOTIABLE    INSTRUMENTS   LAW 

parties,  the  one  primarily  liable  on  it.  After  acceptance  the  acceptor 
becomes  the  one  primarily  liable  followed  by  the  drawer  and  indorsers 
in  their  order.  The  holder,  however,  does  not  have  to  recognize  this  order 
of  liability.  He  may  proceed  against  any  or  all  of  them  irrespective  of 
their  liability  among  themselves,  or  the  order  in  which  their  names  appear. 
The  drawer  warrants  to  the  indorsers  and  to  the  holder  that  the  drawee 
will  accept  and  pay  and  if  the  drawee  does  not,  that  he,  the  drawer,  will 
pay  if  the  bill  is  duly  and  properly  presented  and  protested.  Each  indorser 
warrants  the  same  to  the  holder  and  each  subsequent  indorser — but  not 
to  the  maker.  The  holder  warrants  the  signature  of  the  indorsers  and  this 
warranty  does  not  cease  on  the  payment  of  the  instrument.  The  essential 
parts  of  a  bill  of  exchange  are.  Date,  which  is  usually  of  the  time  of  its 
issue,  but  may  be  dated  ahead  or  back.  Time,  which  is  on  demand  or 
some  fixed  or  determinable  time;  if  no  time  is  stated  it  will  be  deemed 
payable  on  demand.  Order,  which  must  be  specific  and  must  not  direct 
payment  out  of  a  special  fund.  Amount,  must  be  payable  in  money  and 
not  "current  fimds"  or  other  qualified  terms.  Value  received,  while 
usually  used  are  not  essential  to  the  validity  of  the  bill.  Drawee,  name 
and  address.  Acceptance,  to  be  in  writing  and  signed  by  the  drawee,  for 
which  no  particular  words  are  necessary:  usually  "Accepted"  followed  by 
the  date  and  name  of  the  acceptor.  The  acceptance  is  usually  written  on 
the  face  of  the  bill,  but  is  sufficient  if  it  appears  anywhere  thereon.  It  is 
the  right  of  the  payee  to  have  an  unconditional  and  unqualified  acceptance, 
and  if  he  consents  without  the  consent  of  the  drawer  to  take  a  conditional 
acceptance  he  thereby  releases  the  drawer  from  all  liability.  In  the 
foregoing  illustration  Benjamin  Franklin  is  the  payee,  Frank  A.  Wallace 
the  creditor  is  the  maker  and  Charles  A.  Martens  the  drawer  and  acceptor. 

The  object  of  drawing  a  bill  is  to  convert  a  debt,  in  theory  supposed 
to  be  due  from  the  drawee  to  the  drawer,  into  a  transferable  chattel  that 
may  pass  from  one  to  another  by  indorsement  or  by  delivery,  and  this 
object  is  consummated  by  the  acceptance,  which  binds  the  acceptor  to 
whoever  becomes  the  holder,  to  pay  the  original  debtor  absolutely  and 
without  any  reference  to  the  state  of  the  account  between  himself  and  the 
drawer,  leaving  the  latter  still  liable  under  his  original  conditional  obliga- 
tion to  pay  in  default  of  payment  of  the  primary  debtor. 

3  R.  C.  L.  1297;  Manchester  v.  Braedner,  107  N.  Y.  346;  Amsick  v. 
Rogers,  189  N.  Y.  252;  Kimball  v.  Donald,  20  Mo.  577;  64  Am.  Dec.  209. 

A  bill  of  exchange  is  described  as  a  written  request  from  one  person 
to  another  a  specified  sum  of  money  therein  mentioned  at  a  time  certain 
absolutely  in  all  events. 

Wheatley  v.  Strobbe,  73  Am.  Dec.  (Cal.)  522;  Asmick  v.  Rogers,  189 
N.  Y.  252;  Allen  v.  Leaven,  37  Pac.  488. 


BILLS   OF   exchange;   FOKM   AND   INTERPRETATION  297 

A  bill  of  exchange  drawn  on  a  bank,  if  payable  on  demand,  is  a  check, 
and  such  a  bill  is  payable  on  demand  vmless  a  specific  date  of  payment  is 
mentioned. 

Riddle  v.  Bank  of  Montreal,  145  App.  Div.  (N.  Y.)  207. 

Where  for  valuable  consideration  received  from  the  payee,  an  order 
is  drawn  upon  a  third  person,  payable  out  of  a  particular  fund  then  due 
or  to  become  due  from  him  to  the  drawer,  the  delivery  of  the  order  to  the 
payee  operated  as  an  assignment  pro  tanto  of  the  fund;  the  drawee  is  bound 
after  notice  thereof  to  apply  the  fund,  as  it  accrues,  to  the  payment  of  the 
order,  and  the  payee  may  be  action  compel  such  application. 

Brill  V.  Tuttle,  81  N.  Y.  454. 

A  bill  of  exchange  upon  acceptance  becomes  in  effect  a  promissory 
note,  the  acceptor  standing  in  the  place  of  the  maker  and  becoming 
primarily  liable,  and  the  maker  standing  in  the  place  of  the  first  indorser. 

U.  S.  Rail  Co.  V.  Weiner,  169  App.  Div.  (N.  Y.)  561. 

The  bill  itself  implies  a  representation  by  the  drawer  that  the  drawee 
is  in  funds  to  meet  it,  and  the  contract  of  the  former  is  that  the  latter  will 
accept  and  pay  according  to  the  terms  of  the  bill,  the  subsequent  accept- 
ance constitutes  an  admission  of  the  truth  of  the  representation,  which 
cannot  thereafter  be  retracted, 

Heuerematte  v.  Morris,  101  N.  Y.  63. 

An  instrument  in  the  following  form : 


New  York,  July  20,  1895. 
Charles  F.  Fontham, 

Dear  Sir: — Please  pay  to  the  American  Boiler  Co.  the  sum  of  $187.15 
and  charge  the  same  to  my  account  on  heating  contract  at  64  West  99th 
St.  and  oblige. 

Yours  respectfully, 

H.  J.  Apgar. 
"Accepted,  and  I  agree  to  pay  the  simi  specified  within  60  days  from 

date. 

Charles  F.  Fontham. 


is  a  mere  order  on  a  fund  and  is  not  an  accepted  bill  of  exchange,  and  in 
an  action  brought  thereon  by  the  payee  against  the  acceptor,  the  latter 
has  the  right  to  show  that  there  was  nothing  due  on  the  contract. 

American  Boiler  Co.  v.  Fontham,  34  App.  Div.  295;  Butterick  v. 
Colline,  202  Mass.  413. 

An  order  for  the  payment  of  money,  addressed  to  no  one  in  particular 
but  generally  to  any  one  who  owed  him  money  is  too  indefinite  and  uncer- 
tain to  be  binding  on  any  one. 

Dugane  v.  Hoenza,  119  N.  W.  Rep.  141. 


298  NEGOTIABLE   INSTRUMENTS   LAW 

An  instrument  drawn  by  one  person  on  another  person  not  a  bank, 
requiring  the  person  to  whom  it  is  addressed  to  pay  on  demand  a  certain 
sum  of  money  to  the  order  of  the  drawer  is  a  bill  of  exchange  and  not  a 
check. 

Amsick  v.  Rogers,  103  App.  Div.  189  N.  Y.  252. 

Where  a  bill  of  exchange  is  drawn  by  a  corporation  upon  itself,  the 
instrument  may  be  treated  as  an  accepted  bill  or  as  a  promissory  note  at 
the  election  of  the  holder. 

Pavenstedt  v.  N.  Y.  Life  Ins.  Co.,  203  N.  Y.  91. 

Cases  on  subject  generally,  see,  Home  Bank  v.  Drumgoole,  109  N.  Y. 
63;  Munger  v.  Shannon,  61  N.  Y.  251;  Lynch  v.  Bank  of  New  Jersey, 
107  N.  Y.  179;  Buskirk  v.  State  Bank,  83  Pas.  (Colo.)  778;  Columbia 
Bank  v.  Bowen,  114  N.  W.  (Wis.)  451;  Shaver  v.  Western  Union  Co., 
57  N.  Y.  459. 

Draft. 


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The  word  draft  is  applied  to  instruments  in  the  form  of  bills  of  exchange 
drawn  for  the  purpose  of  collecting  for  the  drawer's  own  use  and  account, 
money  due  him  from  some  person.  The  payee  of  a  draft  is  usually  a  bank 
delegated  by  the  drawer  to  make  the  collection,  and  are  usually  made 
payable  to  a  bank  where  the  debtor  resides.  If  the  drawee  was  a  bank 
the  instnmient  wotdd  be,  strictly  speaking,  a  check.  The  essential  parts 
of  a  draft  are.  Time,  which  shall  be  such  time  as  the  drawer  shall  fix  and  is 
usually  "at  sight."  Amount,  which  should  be  definite.  Value  received 
is  not  necessary  although  customary  to  insert  as  in  notes  and  bills  of  ex- 
change. Drawee,  whose  name  and  address  should  be  given  for  the  infor- 
mation of  the  payee.  Signature,  of  the  drawer.  In  the  draft  illustrated 
the  Union  Bank  is  the  payee,  Charles  W.  Martens  the  debtor  and  drawee, 
and  Frank  A.  Wallis  the  creditor  and  drawer. 

§  211.  Bill  not  an   assignment   of   funds   in   hands   of 
drawee.     A  bill  of  itself  does  not  operate  as  an  assignment 


BILLS    OF    exchange;    form    AND    INTERPRETATION  299 

of  the  funds  in  the  hands  of  the  drawee  available  for  the  pay- 
ment thereof,  and  the  drawee  is  not  liable  on  the  bill  unless 
and  until  he  accepts  the  same. 

But  where  the  drawee  is  a  banker  and  has  funds  of  the  drawer  on 
deposit,  he  is  liable  to  an  action  for  damages  by  the  depositor  for  dishonor- 
ing a  check,  to  meet  which  he  has  sufficient  funds.  See  notes  to  Section 
325. 

A  check  is  analogous  to  a  bill  of  exchange,  and  a  bank  cannot  be  made 
liable  thereon  except  by  its  acceptance  indorsed  upon  it  in  writing. 

Risley  v.  Phoenix  Bank,  83  N.  Y.  318;  Lynch  v.  National  Bank  of 
N.  J.  107  N.  Y.  179;  Cowperthwaite  v.  Sheffield,  3  N.  Y.  251;  Brill  v. 
Tuttle,  81  N.  Y.  454. 

An  order  drawn  by  a  creditor  on  his  debtor,  directing  the  debtor  to 
pay  a  certain  amoimt  to  a  third  party,  is  not  effectual  as  an  equitable 
assignment  unless  it  is  drawn  upon  a  particular  fund.  Such  an  order  is 
not  binding  upon  the  debtor  as  a  bill  of  exchange  unless  he  signs  a  written 
acceptance  thereof. 

Izzo  V.  Ludington,  79  App.  Div.  (N.  Y.)  272;  Shaver  v.  W.  U.  T.  Co., 
57  N.  Y.  459;  Attorney  General  v.  Continental  Life,  71  N.  Y.  325;  Wein- 
hauer  v.  Morrison,  49  Hun.  498. 

A  check  or  draft  drawn  in  the  ordinary  form  does  not  operate  as  an 
equitable  assignment  of  the  funds  of  the  drawer  in  the  hands  of  the  drawee 
or  create  any  obligation  against  the  drawer  in  favor  of  the  payee  imtil  its 
acceptance  by  or  delivery  to  him. 

McArdle  v.  German  Ins.  Co.,  183  N.  Y.  368. 

Where  a  draft  drawn  upon  the  general  credit  of  the  drawer  with  the 
drawee  does  not  operate  as  an  assignment  of  a  particular  fund,  even  though 
one  to  which  the  draft  is  to  be  charged  is  indicated,  yet  where  it  is  the 
intention  of  the  parties  that  the  draft  shall  be  paid  out  of  a  particular 
fund  and  not  absolutely  and  at  all  events,  it  operates  as  an  assignment  of 
the  fund. 

Muller  V.  Kling,  149  App.  Div.  (N.  Y.)  177;  Fourth  Street  Bank  v. 
Yardley,  165  U.  S.  634;  Brille  v.  Tuttle,  81  N.  Y.  454. 

Where  the  mere  delivery  to  a  third  person  of  a  check  or  draft  drawn 
by  a  creditor  upon  his  debtor  does  nor  effect  a  legal  transfer  of  the  debt, 
where  it  appears  that  the  intent  was  to  make  such  a  transfer,  it  is  the 
duty  of  the  court  to  carry  out  the  intent. 

Throop  Co.  V.  Smith,  110  N.  Y.  83. 

The  drawer  of  a  bill  of  exchange  is  presumed  to  know  the  handwriting 
of  the  drawer.  And  the  payment  of  the  bill  by  the  drawee  is  ordinarily 
an  admission  of  the  drawer's  signature,  which  he  is  not  afterwards,  in  a 


300  NEGOTIABLE    INSTRUMENTS    LAW 

controversy  between  himself  and  the  holder,  at  liberty  to  dispute.  And 
therefore  if  the  drawer's  signature  is  on  a  subsequent  day  discovered 
to  be  a  forgery,  the  drawee  cannot  compel  the  holder,  to  whom  he  has  paid 
the  bill,  to  restore  the  money,  unless  the  holder  be  in  some  way  implicated 
in  the  fraud.  But  the  reason  of  the  rule  fails,  and  the  rule  itself  does  not 
apply  where  the  forgery  is  not  in  counterfeiting  the  name  of  the  drawer, 
but  in  altering  the  body  of  the  bill. 

Bank  of  Commerce  v.  Union  Bank,  3  N.  Y.  230;  White  v.  Bank, 
64N.  Y.  316. 

A  check  does  not  operate  as  an  assignment  of  the  funds  in  the  bank. 

Rankin  v.  Colonial  Bank,  31  Misc.  227,  230. 

The  effect  of  the  acceptance  is  to  constitute  the  acceptor  the  principal 
debtor.  By  the  act  of  acceptance  he  assumes  to  pay  the  order  or  bill, 
and  becomes  the  principal  debtor  for  the  amount  specified ;  the  acceptance 
being  an  admission  of  everything  essential  to  the  existence  of  such  liability. 

Clayton  v.  Drug  Co.,  147  Pac.  Rep.  460;  Reilly  v.  Daly,  159  Pa.  St. 
605. 

Cases  on  the  subject  generally,  see,  Harris  v.  Clark,  3  N.  Y.  93; 
Alger  V.  Scott,  54  N.  Y.14;  Munger  v.  Shannon,  61  N.  Y.  251;  Bailey  v. 
R.  R.  Bank,  11  Fla.  266;  Fulton  v.  Gesterding,  47  Fla.  150. 

There  is  a  distinction  between  an  order  and  a  bill  of  exchange.  An 
order  payable  out  of  a  designated  fund  is  a  specific  appropriation  of  that 
fund  and  invests  in  the  payee  a  right  to  the  particular  thing  thus  appro- 
priated, which  will  be  made  effective,  as  against  the  thing,  by  treating  the 
person  on  whom  the  order  is  drawn  as  a  holder  of  what  is  so  specifically 
appropriated  for  him  in  whom  it  has  been  vested  by  the  order.  A  bill  of 
exchange  confers  no  such  rights  and  has  no  such  effect.  It  is  payable 
generally,  absolutely  and  at  all  events.  It  does  not  appropriate  any 
particular  thing  to  the  payee.  The  idea  of  a  transfer  of  assignment  to  the 
payee  or  an  interest  in  a  particular  fund  does  not  obtain  in  reference  to  a 
bill  of  exchange.  If  accepted  by  the  drawee,  he  is  bound  by  virtue  of  his 
acceptance,  and  not  upon  the  ground  of  an  assignment  of  so  much  money 
in  his  hands  belonging  to  the  drawer.  A  bill  of  exchange  does  not  amoimt 
to  an  assignment,  even  after  it  has  been  accepted. 

3  R.  C.  L.  1298;  Bush  v.  Foote,  38  Am.  Rep.  310;  Kimball  v.  Donald, 
64  Am.  Dec.  (Mo.)  209. 

§  212.  Bill  addressed  to  more  than  one  drawee.  A  bill 
may  be  addressed  to  two  or  more  drawees  jointly,  whether 
they  are  partners  or  not;  but  not  to  two  or  more  drawees  in 
the  alternative  or  in  succession. 


BILLS  OF  exchange;  form  and  interpretation  301 

Variant. — The  Wisconsin  statute  omits  the  words  "or  in  succession." 


This  section  seems  to  be  inconsistent  with  Section  27,  Subd.  5. 

§  213.  Inland  and  foreign  bills  of  exchange.  An  inland 
bill  of  exchange  is  a  bill  which  is,  or  on  its  face  purports  to  be, 
both  drawn  and  payable  within  this  state.  Any  other  bill  is 
a  foreign  bill.  Unless  the  contrary  appears  on  the  face  of  the 
bill,  the  holder  may  treat  it  as  an  inland  bill. 

A  written  instrument  for  the  payment  of  money  addressed  by  a  firm 
doing  business  in  the  City  of  New  York  to  a  firm  doing  business  in  Vienna, 
Austria,  signed  by  the  firm  giving  it,  requiring  the  firm  to  which  it  is 
addressed  to  pay  on  demand  a  specific  sum  in  EngHsh  money  to  the  order 
of  the  drawers  and  charge  the  same  to  the  account  of  a  cargo  of  pig  iron 
shipped  to  Vienna  from  a  specified  steamship,  is  a  foreign  bill  of  exchange 
within  this  section. 

Amsinck  v.  Rogers,  189  N.  Y.  252. 

The  laws  of  the  place  where  bills  are  payable,  determine  what  con- 
stitute payment. 

Kessler  v.  Armstrong  Co.,  158  Fed.  747;  Sexton  v.  Armstrong  Co., 
207  U.  S.  597. 

The  damages  recoverable  by  the  payee  of  a  negotiable  foreign  bill  of 
exchange  protested  for  nonpayment  against  the  drawee  may  be  deemed 
to  be  made  up  as  follows:  (1)  The  face  of  the  bill;  (2)  interest  thereon; 
(3)  protest  fees;  (4)  re-exchange,  i.  e.,  the  additional  expense  of  procuring 
a  new  bill  for  the  same  amount  payable  in  the  same  place  on  the  day  of  its 
dishonor;  or  a  percentage  in  lieu  of  such  re-exchange  in  jurisdictions  where 
it  is  prescribed  by  statute. 

Bank  of  U.  S.  v.  United  States,  2  How.  (U.  S.)  745;  Oliver  Co.  v. 
Walbridge,  19  N.  Y.  134;  2  Dan.  Neg.  Inst.  (4th  ed.)  Section  1444;  Paven- 
stedt  v.  Life  Ins.  Co.,  203  N.  Y.  91. 

See  also,  Riddle  v.  Bank  of  Montreal,  145  App.  Div.  N.  Y.  207; 
Casper  v.  Kuhne,  159  App.  Div.  (N.  Y.)  390. 

A  bill  in  form  drawn  in  United  States  of  Columbia  by  a  corporation 
on  itself  in  New  York  is  a  foreign  bill  and  not  a  simple  order  or  note. 
Pavenstedt  v.  N.  Y.  Life  Ins.  Co.,  203  N.  Y.  91. 

§  214.  When  bill  may  be  treated  as  promissory  note. 

Where  in  a  bill  the  drawer  and  drawee  are  the  same  person, 
or  where  the  drawee  is  a  fictitious  person,  or  a  person  not 


302  NEGOTIABLE    INSTRUMENTS    LAW 

having  capacity  to  contract,  the  holder  may  treat  the  instru- 
ment, at  his  option,  either  as  a  bill  of  exchange  or  a  promissory 
note. 

Variant. — The  Wisconsin  statute  omits  the  words  "or  a  person." 
See  Section  36,  subd.  5. 


A  draft  drawn  by  an  agent  on  his  principal  by  authority  of  the  prin- 
cipal is  equivalent  to  a  draft  drawn  by  the  principal  upon  himself,  and 
need  not  be  accepted  by  the  drawee  in  order  to  bind  it. 

Gray  Co.  Farmers'  Bank,  60  S.  M.  537;  Falk  v.  Meade,  127  U.  S.  702; 
Dow  Law  Bank  v.  Godfrey,  126  Mich.  521. 

Where  a  sight  draft  is  drawn  by  an  agent  upon  his  principal  in  pa5nTient 
of  purchases  for  the  drawee,  the  effect  is  that  of  a  bill  drawn  upon  the 
drawer  himself,  which  the  holder  may  treat  as  a  promissory  note. 

Clements  v.  Stanton  Co.,  61  Wash.  419. 

Cases  on  the  subject  generally,  see,  1  Dan.  Neg.  Inst.  Section  398; 
Bank  of  Genesee  v.  Patchin,  19  N.  Y.  312;  Sally  v.  Terrill,  55  L.  R.  A.  730; 
Cimningham  v.  Wardell,  12  Me.  466;  4  Am.  &  Eng.  Ency  of  Law,  (2nd  ed.) 
109;  McCann  v.  Randell,  147  Mass.  91 ;  Bull  v.  Sims,  23  N.  Y.  370;  Paven- 
stedt  V.  Life  Ins.  Co.,  203  N.  Y.  95. 

§  215.  Referee  in  case  of  need.  The  drawer  of  a  bill 
and  any  indorser  may  insert  thereon  the  name  of  a  person  to 
whom  the  holder  may  resort  in  case  of  need,  that  is  to  say,  in 
case  the  bill  is  dishonored  by  non-acceptance  or  non-payment. 
Such  person  is  called  the  referee  in  case  of  need.  It  is  in  the 
option  of  the  holder  to  resort  to  the  referee  in  case  of  need  or 
not  as  he  may  see  fit. 


ACCEPTANCE  303 


ARTICLE  12 
Acceptance 

Section  220.  Acceptance;  how  made. 

221.  Holder  entitled  to  acceptance  on  face  of  bill. 

222.  Acceptance  by  separate  instrument. 

223.  Promise  to  accept;  when  equivalent  to  accept- 

ance. 

224.  Time  allowed  drawee  to  accept. 

225.  Liability  of  drawee  retaining  or  destroying  bill. 

226.  Acceptance  of  incomplete  bill. 

227.  Kinds  of  acceptances. 

228.  What  constitutes  a  general  acceptance. 

229.  Qualified  acceptance. 

230.  Rights  of  parties  as  to  qualified  acceptance. 

§  220.  Acceptance ;  how  made.  The  acceptance  of  a  bill 
is  the  signification  by  the  drawee  of  his  assent  to  the  order 
of  the  drawer.  The  acceptance  must  be  in  writing  and  signed 
by  the  drawee.  It  must  not  express  that  the  drawee  will 
perform  his  promise  by  any  other  means  than  the  payment  of 
money. 


304  NEGOTIABLE   INSTBUMENTS   LAW 


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{INDORSED) 

ERNEST  WEINER 
CHESTER  W.  TALLCOTT 
UNITED  STATES  RAIL  CO.,  D.  F.  SHANNON,  TREAS. 
PAY  TO  THE  ORDER  OF  ANY  BANK,  BANKER  OR  TRUST  CO. 

DEC.  10,  1915 

ALL  PRIOR  INDORSEMENTS  GUARANTEED 

THIRD  NATIONAL  BANK 

Upon  acceptance  a  bill  of  exchange  becomes  in  effect  a  promissory 
note,  the  acceptor  standing  in  the  place  of  the  maker,  and  becoming 
primarily  liable,  and  the  maker  standing  in  place  of  the  first  indorser. 
So  in  the  case  illustrated  upon  its  face,  Ernest  Weiner  &  Co.  become  pri- 
marily liable  and  the  United  States  Rail  Co.  secondarily  liable  to  Ernst 
Weiner  and  C.  W.  Tallcott.  When  the  acceptor  defaulted  in  payment 
the  United  States  Rail  Co.  obligation  arose,  and  when  it  acquired  title 
to  the  note  its  liability  was  extinguished  because  it  was  both  debtor  and 
creditor. 

United  States  Rail  Co.  v.  Weiner,  169  App.  Div.  561. 

Prior  to  the  adoption  of  the  statute  acceptance  could  be  made  orally. 

Johnson  v.  Clark,  39  N.  Y.  216;  Bank  v.  Wetherald,  36  N.  Y.  335; 
Aetna  Bank  v.  Fourth  National  Bank,  46  N.  Y.  88;  Wright  v.  Bank, 
64  N.  Y.  316;  Hanna  v.  McCrary,  141  Pac.  996. 

Until  the  bill  has  been  accepted  the  drawer  is  the  primary  debtor. 
After  acceptance  the  drawer  becomes  secondarily  liable,  and  his  liability 
is  the  same  as  that  of  a  first  indorser  upon  a  promissory  note.  The  effect 
of  acceptance  of  a  bill  is  to  constitute  the  acceptor  the  principal  debtor. 

A.  Clayton  Co.  v.  Drug  Co.,  147  Pac.  460. 

Acceptance  must  be  made  by  the  drawee  or  his  duly  authorized  agent 
and  must  be  in  writing. 


ACCEPTANCE 


305 


Hascall  v.  Association,  5  Hun.  152;  Izzo  v.  Ludington,  79  App.  Div. 
275;  Risley  v.  Phenix  Bank,  83  N.  Y.  318. 

The  prestimption  is  that  every  bill  of  exchange  is  drawn  on  accoimt 
of  some  indebtedness  from  the  drawee  to  the  drawer,  and  that  the  accept- 
ance is  an  appropriation  of  the  funds  of  the  latter  in  the  hands  of  the 
former.  The  rule  of  law  is  not  imjust  that  prevents  the  acceptor  from 
showing  as  a  defense  against  a  suit  by  the  payee  a  want  of  funds  of  the 
drawer  in  his  hands,  for  it  was  his  duty  to  ascertain  before  he  accepted 
the  bill  whether  he  owed  the  drawer  that  amount.  This  was  exclusively 
within  his  knowledge,  but  the  plaintiff  had  no  means  of  knowing  how  the 
fact  v/as,  and  he  had  a  right  to  assume  that  the  defendant  would  not 
accept  the  bill  unless  he  had  funds  of  the  drawer,  sufficient  to  make  good 
the  acceptance. 

Jarvis  v.  Wilson,  46  Conn.  90;  Brill  v.  Tuttle,  81  N.  Y.  454. 

This  section  requiring  the  acceptance  of  a  bill  of  exchange  to  be  in 
writing,  does  not  apply  to  a  foreign  bill  payable  in  another  state;  the  law 
of  such  state  not  having  been  proved,  until  such  proof,  the  common  law 
rule  will  be  presumed  to  apply,  according  to  which  acceptance  may  be 
oral. 

Bank  v.  Bright,  120  S.  W.  Rep.  (Mo.)  648. 

Oral  acceptance  is  not  binding  on  the  drawee. 

Clayton  Co.  v.  Drug  Co.,  147  Pac.  460. 

An  acceptance  of  a  bill  cannot,  as  against  a  bona  fide  holder  for 
value,  defend  on  the  ground  that  the  acceptance  was  without  consideration 
or  for  accommodation. 

National  Park  Bank  v.  Saitta,  127  App.  Div.  625;  Arpin  v.  Owens, 
140  Mass.  141;  Heuertematte  v.  Morris,  101  N.  Y.  63. 

A  bill  of  exchange  is  negotiable  before  acceptance  and  the  acceptance 
is  an  acknowledgement  of  the  debt  it  represents,  and  an  absolute  promise 
to  pay  it  to  the  person  who  is  or  shall  become  the  holder  of  the  bill;  and 
to  allow  a  want  of  consideration  for  the  acceptance  to  defeat  the  right 
of  a  bona  fide  holder,  whether  he  became  such  before  or  after  acceptance, 
would  be  contrary  to  the  nature  and  purpose  of  bills  of  exchange  and 
to  the  uniform  usage  in  regard  to  them. 

Arpin  v.  Owens,  140  Mass.  144. 

A  bank  is  not  liable  on  equitable  grounds  to  the  holder  for  the  amount 
of  an  unaccepted  check  which  it  has  refused  to  pay  because  the  holder 
acquired  the  check  on  the  oral  representation  of  the  bank  that  the  drawer 
had  funds  on  deposit  to  meet  the  check,  that  the  check  was  good,  and  that 
the  holder  might  safely  take  it  in  payment  for  goods  sold  the  drawer. 

Rambo  v.  Bank,  88  Kans.  257. 


306  NEGOTIABLE    INSTRUMENTS    LAW 

One  H  sent  a  telegram  to  the  defendant  reading,  "Will  you  wire  me 
that  you  will  honor  draft  for  $300?"  Defendant  telegraphed  back,  "I 
will."  Thereupon,  H  presented  draft  for  $300,  drawn  on  defendant  to 
H's  order,  and  the  two  telegrams  to  plaintiff  which  purchased  the  draft 
on  the  strength  of  the  telegrams.  Held,  that  the  telegrams  created  an 
agreement  on  the  part  of  defendant  to  honor  the  draft. 

Oil  Well  Co.  V.  MacMurphy,  119  Minn.  500;  see  also,  Carmichael  v. 
Banking  Co.,  191  S.  W.  1043;  In  re  Armstrong,  41  Fed.  381;  Myers  v. 
Bank,  27  111.  App.  254;  Bank  v.  Garretson,  51  Fed.  168. 

Pleading. — While  the  section  requires  the  acceptance  to  be  in  writing, 
an  allegation  in  the  complaint  that  the  drawee  "agreed  to  pay  the  order" 
is  sufficient. 

Bamsdall  v.  Waltemeyer,  142  Fed.  Rep.  415. 

A  complaint  in  an  action  upon  an  order  or  bill  of  exchange  is  in- 
sufficient, and  a  demurrer  thereto  is  properly  sustained  for  want  of  sufficient 
facts  where  it  fails  to  allege  that  the  acceptance  of  the  order  by  defendant 
was  in  writing. 

Wadhams  v.  Portland  R.  Co.,  37  Wash.  86. 

§  221.  Holder  entitled  to  acceptance  on  face  of  bill. 

The  holder  of  a  bill  presenting  the  same  for  acceptance  may 
require  that  the  acceptance  be  written  on  the  bill  and  if  such 
request  is  refused,  may  treat  the  bill  as  dishonored. 

This  provision  is  not  confined  to  sight  bills,  but  seems  to  be  applicable 
to  bills  of  exchange,  and  consequently  if  a  bill  had  been  presented  to  the 
drawee  and  he  refused  to  accept  it  the  holder  would  be  entitled  to  treat 
the  bill  as  dishonored,  and  would  have  acquired  the  immediate  right  to 
call  on  the  other  parties  to  the  bill. 

National  Park  Bank  v.  Saitta,  127  App.  Div.  627. 

§  222.  Acceptance  by  separate  instrument.  Where  an 
acceptance  is  written  on  a  paper  other  than  the  bill  itself,  it 
does  not  bind  the  acceptor  except  in  favor  of  a  person  to  whom 
it  is  shown  and  who,  on  the  faith  thereof,  receives  the  bill  for 
value. 

Variant. — The  Illinois  statute  omits  the  words  "to  whom  it  is  shown 
and." 


An  action  cannot  be  maintained  against  a  drawee  until  he  has  become 
a  party  to  the  instrument  by  his  written  acceptance.  The  fact  that  he 
wrote  a  letter  to  the  drawer  that  money  was  close  but  that  he  would  pay 
is  not  sufficient  to  hold  the  drawee  and  make  him  a  party  to  the  bill. 


ACCEPTANCE  307 

Fairchild  v.  Feltman,  32  Hun.  399. 

An  acceptance  of  a  draft  may  be  upon  a  separate  paper  and  the 
acceptor  may  impose  any  conditions  which  he  may  choose.  A  letter 
accompanying  a  draft  may  be  used  to  qualify  or  limit  an  acceptance 
indorsed  on  a  draft,  provided  the  question  of  innocent  holder  is  not  in- 
volved in  the  case. 

Lehnhard  v.  Sidway,  160  Mo.  App.  83. 

A  written  agreement  modifying  the  terms  of  an  accepted  bill  of 
exchange  and  securely  glued  thereto,  is  a  part  thereof  and  cannot  be  law- 
fully detached  therefrom  without  the  maker's  consent. 

Bothell  V.  Schqeitzer,  84  Neb.  271;  Gerrish  v.  Glines,  56  N.  H.  9; 
Stephens  v.  Davis,  2  S.  W.  (Tenn.)  382;  Scofield  v.  Ford,  56  la.  370; 
Wait  V.  Pomeroy,  20  Mich.  425. 

A  telegram  agreeing  to  accept  a  person's  draft  for  a  certain  sum 
"for  stock"  is  not  a  conditional  contract,  but  an  absolute  undertaking 
to  accept  and  pay  the  same;  and  a  party  discounting  the  draft,  on  the 
faith  of  such  telegram,  is  entitled  to  recover  the  amount  of  the  party  so 
agreeing  to  accept. 

Coffman  v.  Campbell,  87  111.  98. 

The  words  "for  stock"  subserves  no  purpose  as  between  the  payee 
and  the  acceptor.  At  most,  those  words  are  but  an  indication  of  the 
nature  of  the  consideration  as  between  the  drawer  and  acceptor. 

State  Bank  v.  Bradstreet,  89  Neb.  188;  Bissell  v.  Lewis,  4  Mich.  450. 

§  223.  Promise  to  accept;  when  equivalent  to  accept- 
ance. An  unconditional  promise  in  writing  to  accept  a  bill 
before  it  is  drawn  is  deemed  an  actual  acceptance  in  favor  of 
every  person  who,  upon  the  faith  thereof,  receives  the  bill  for 
value. 

Variant. — The  lUinois  statute  adds  the  words  "or  after"  after  the 
word  "before." 


On  the  subject  embodied  in  the  section  the  court,  in  Miller  v.  Kling, 
149  App.  Div.  180,  said:  "It  is  frequently  a  nice  question  to  what  extent 
a  promise  to  accept  a  bill  not  in  existence  binds  the  promisor  to  third 
parties  who  have  acted  on  the  faith  of  it.  The  section  is  declaratory  of 
the  common  law"  (see  Mason  v.  Hunt,  1  Dong.  297).  In  that  case  Lord 
Mansfield  said:  "But  an  agreement  to  accept  is  still  but  an  agreement, 
and  if  it  is  conditional,  and  a  third  person  takes  the  bill  knowing  of  the 
conditions  annexed  to  the  agreement,  he  takes  it  subject  to  such  condi- 
tions." 


308  NEGOTIABLE    INSTRUMENTS    LAW 

See  on  the  subject  generally,  Greele  v.  Parker,  5  Wend.  414;  Ulster 
County  Bank  v.  McFarlan,  5  Hill  432;  Shaver  v.  Western  Union  Tel.  Co., 
57  N.  Y.  459;  Merchants'  Bank  v.  Griswold,  72  N.  Y.  472;  Ruiz  v. 
Renauld,  100  N.  Y.  256;  Germania  National  Bank  v.  Taaks,  101  N.  Y. 
442;  Story  Bills,  Sec.  249;  Parsons  Notes  and  Bills,  292. 

Where  to  a  promise  to  accept  a  bill  of  exchange  is  attached  a  condition 
precedent,  which  is  a  substantive  part  of  the  promise,  and  is  so  coupled 
with  it  as  to  show  that  the  promisor  did  not  intend  to  bind  himself, 
except  on  compliance  with  the  condition,  this  is  not  an  unconditional 
promise  to  accept  within  the  meaning  of  the  statute  such  as  will  support 
an  action  against  the  promisor  as  acceptor. 

Germania  National  Bank  v.  Taaks,  101  N.  Y.  442. 

An  absolute  authority  to  draw  is  equivalent  to  an  unconditional 
promise  to  pay. 

Barney  v.  Worthington,  37  N.  Y.  112;  Merchants'  Bank  v.  Griswold, 

72  N.  Y.  479. 

Telegraphic  authority  to  draw  was  an  unconditional  promise  to 
accept  within  the  statute. 

Johnson  v.  Clark,  39  N.  Y.  218;  Wells  v.  Western  Union  Telegraph 
Co.,  144  la.  605;  123  N.  W.  371;  24  L.  R.  A.  1045;  Brunkman  v.  Hunter, 

73  No.  172. 

A  letter  written  within  a  reasonable  time  before  or  after  the  date  of 
a  bill  of  exchange,  describing  it  in  terms  not  to  be  mistaken,  and  promising 
to  accept  it,  is,  if  shown  to  the  person  who  afterwards  takes  the  bill  on 
the  credit  of  the  letter,  a  virtual  acceptance,  binding  the  person  who 
makes  the  promise. 

Bank  v.  Hay,  143  N.  C.  332;  First  National  Bank  v.  Muskogee,  40 
Okla.  603. 

The  promise  must  so  describe  the  bill  that  there  can  be  no  doubt  of 
its  application  to  it. 

Bank  of  Flora  v.  Clark,  61  Md.  405. 

Where  defendants,  co-partners,  engaged  in  cutting  timbers,  sublet 
the  work  to  M,  who  in  turn  sublet  to  one  H,  and  agreed  with  the  latter 
that  they  would  pay  the  men  employed  by  him,  and  he  drew  orders  in 
favor  of  the  laborers  on  one  of  the  defendants,  which  were  cashed  by  the 
plaintiff  on  the  request  of  one  of  the  defendants,  and  on  his  promise  to 
pay.  Held,  that  defendants,  while  not  liable  on  the  order  in  that  there 
was  no  written  promise  to  accept  them  as  required  by  this  section,  but 
that  they  were  liable  nevertheless,  for  the  plaintiff  paid  the  money  and 
became  their  agent. 

Nagle  V.  Richards,  134  App.  Div.  25. 


AOOIPTANOE  309 

§  224.  Time  allowed  drawee  to  accept.  The  drawee  is 
allowed  twenty-four  hours  after  presentment  in  which  to 
decide  whether  or  not  he  will  accept  the  bill;  but  the  accept- 
ance if  given  dates  as  of  the  day  of  presentation. 

The  intention  of  this  section  is  to  expediate  action  by  the  drawee  in 
accepting  or  refusing  a  bill  presented  and  retained  by  him,  and  to  fix  a 
definite  time,  which  before  the  adoption  of  the  statute  was  uncertain. 
He  is  granted  twenty-four  hours  after  delivery,  and  not  after  demand  for  a 
return  of  the  bill,  in  which  he  must  accept  or  decline  to  honor  it.  The 
time  for  returning  the  bill  to  the  holder  does  not  begin  to  run  from  the 
demand  for  its  return,  but  the  date  of  its  delivery.  The  drawee  must, 
therefore,  act  within  twenty-four  hours  from  the  date  of  the  delivery  of 
the  bill,  whether  his  action  be  an  acceptance  or  refusal. 

3  R.  C.  L.  1309;  Wisner  v.  Bank  of  Gallitzin,  220  Pa.  St.  21. 

§  225.  Liability  of  drawee  retaining  or  destroying  bill. 

Where  a  drawee  to  whom  a  bill  is  delivered  for  acceptance 
destroys  the  same,  or  refuses  within  twenty-four  hours  after 
such  delivery,  or  within  such  other  period  as  the  holder  may 
allow,  to  return  the  bill  accepted  or  non-accepted  to  the  holder, 
he  will  be  deemed  to  have  accepted  the  same. 

Variant. — The  Illinois  statute  omits  this  section.  The  Wisconsin 
statute  adds,  "Mere  retention  of  the  bill  is  not  an  acceptance."  The 
Pennsylvania  statute  adds  the  following  proviso,  "Provided  that  the 
mere  retention  of  such  bill  by  the  drawee,  imless  its  return  has  been  de- 
manded, will  not  amount  to  an  acceptance;  and  provided  further  that  the 
provisions  of  this  section  shall  not  apply  to  checks." 


This  section  applies  only  to  cases  in  which  the  acts  of  the  drawee  are 
of  a  tortious  character,  and  imply  an  unauthorized  conversion  of  the 
bill  by  the  drawee,  and  not  to  cases  in  which  the  bill  is  willingly  left  in 
the  hands  of  the  drawer  by  the  holder,  and  no  demand  therefor  is  made. 

Matteson  v.  Moulton,  11  Hun.  268;  79  N.  Y.  627;  Westburg  v. 
Chicago  Coal  Co.,  117  Wis.  589. 

The  defendant  received  three  checks  in  payment  of  goods,  drawn 
upon  a  branch  of  plaintiff's  bank.  The  following  day  the  defendant 
deposited  the  checks  in  the  Corn  Exchange  Bank,  which  presented  them 
through  the  clearing  house  where  they  were  credited  to  the  Com  Exchange 
Bank  and  debited  to  the  plaintiff.     The  checks  turned  out  to  be  worth 


310  NEGOTIABLE    INSTRUMENTS    LAW 

less.  Held,  though  the  recognition  of  the  checks  at  the  clearing  house 
was  merely  an  assumption  of  their  genuineness,  subject  to  future  examina- 
tion, and  the  arrival  of  the  checks  at  plaintiff's  branch  bank  was  their 
first  presentation  for  pa>Tnent,  yet  a  check  is  a  bill  of  exchange  payable 
on  demand,  and  a  drawee  is  deemed  to  have  accepted  the  same  if  he  does 
not  retiuTi  it  within  twenty-four  hours  after  its  delivery  for  acceptance, 
as  provided  by  Sections  321,  325. 

State  Bank  v.  Weiss,  46  Misc.  93;  First  National  Bank  v.  Bank,  154 
S.  W.  967. 

The  word  "refuses"  as  used  in  this  section,  does  not  mean  a  tortious 
refusal,  nor  does  it  imply  that  a  previous  demand  for  the  return  of  the 
check  to  the  holder  shall  be  made.  The  word  is  to  be  construed  so  as  to 
cover  a  failure  or  neglect  to  return  the  check. 

Wisner  v.  First  National  Bank,  220  Pa.  St.  21;  Westberg  v.  Chicago 
Lumber  Co.,  117  Wis.  589;  94  N.  W.  572;  Matteson  v.  Moulton,  11  Hun. 
268;  affirmed  79  N.  Y.  627;  State  Bank  v.  Weiss,  91  N.  Y.  276. 

The  holder  of  a  draft  delivered  to  the  drawee  for  acceptance,  in  order 
to  raise  a  presumption  of  acceptance  by  the  drawee's  destruction  thereof, 
or  a  refusal  to  return  as  provided  by  this  section,  must  show  that  the 
drafts  were  negotiable,  or  of  a  nature  and  kind  that  could  be  presented  for 
acceptance,  or  that  they  were  actually  delivered  to  the  trustee  for  ac- 
ceptance. 

First  National  Bank  v.  Whitmore,  177  Fed.  397. 

§  226.  Acceptance  of  incomplete  bill.  A  bill  may  be 
accepted  before  it  has  been  signed  by  the  drawer,  or  while 
otherwise  incomplete,  or  when  it  is  overdue,  or  after  it  has 
been  dishonored  by  a  previous  refusal  to  accept,  or  by  non- 
payment. But  when  a  bill  payable  after  sight  is  dishonored 
by  non-acceptance  and  the  drawee  subsequently  accepts  it, 
the  holder,  in  the  absence  of  any  different  agreement,  is  entitled 
to  have  the  bill  accepted  as  of  the  date  of  the  first  presentment. 

A  bill  or  note  does  not  lose  its  negotiable  character  by  being  dis- 
honored, and  the  indorsement  although  made  after  dishonor,  follows  the 
nature  of  the  original  contract  and  is  negotiable  unless  it  contains  express 
words  of  restriction. 

L€a\4tt  V.  Putnam,  3  N.  Y.  494. 

The  right  of  a  holder  of  a  draft  to  recover  of  the  acceptor  thereof  is 
not  affected  by  the  fact  that  such  acceptance  was  an  accommodation  one, 
nor  by  the  fact  that  he  discounted  the  draft  before  acceptance. 


ACCEPTANCE  311 

Iselin  V.  Chemical  National  Bank,  16  Misc.  437;  Mechanics  Bank  v. 
Livingston,  33  Barb.  458;  Bank  of  Louisville  v.  Ellery,  34  Barb.  630. 

§  227.  Kinds  of  acceptances.  An  acceptance  is  either 
general  or  qualified.  A  general  acceptance  assents  without 
qualification  to  the  order  of  the  drawer.  A  qualified  accept- 
ance in  express  terms  varies  the  effect  of  the  bill  as  drawn. 

In  Niagara  District  Bank  v.  Fairman,  etc.  Mfg.  Co.,  31  Barb.  403, 
the  defendant,  which  was  sued  as  the  drawer  of  a  bill  of  exchange,  was  a 
corporation,  located  in  Rochester,  N.  Y.  The  bill,  upon  which  the  action 
was  based,  was  drawn  on  A.  Yerrington  &  Co.,  and  addressed  to  that 
company  at  Cobourg,  in  Upper  Canada.  The  bill  was  accepted  by  the 
drawee,  payable  at  the  Bank  of  Upper  Canada,  a  place  about  ten  miles 
distant  from  Cobourg. 

In  holding  that  the  drawer  had  been  discharged  the  court  said:  "If 
the  Bank  of  Upper  Canada,  where  this  bill  was  made  payable  by  the  ac- 
ceptors, was  located  in  the  same  city,  or  town,  or  village  where  such 
acceptors  resided,  according  to  the  case  of  Troy  City  Bank  v.  Lauman, 
19  N.  Y.  477,  the  acceptance  payable  at  such  a  bank  would  have  been 
entirely  proper.  Such  acceptance  is  not  a  departure  from  the  tenor  of 
the  bill.  It  merely  fixes  a  place  of  payment  for  the  mutual  convenience 
of  the  acceptors  and  the  holder,  and  can  work  no  possible  injury  to  the 
drawer  or  indorsers,  as  it  will  not  affect  the  time  for  the  presentment  of 
the  bill  to  or  for  the  service  of  notice  of  non-payment  on  the  parties 
entitled  to  such  notice.  But  an  acceptance  of  a  bill  at  a  different  place 
from  that  of  the  residence  of  the  drawee,  by  necessary  implication  from 
this  case  of  the  Troy  City  Bank  v.  Lauman,  must  be  a  material  departure 
from  the  bill.  This  must  be  so  upon  principle.  The  acceptance  becomes 
a  part  of  the  bill,  and  any  material  variance  from  the  tenor  and  import 
of  the  bill,  made  in  the  terms  or  manner  of  the  acceptance,  taken  or 
assented  to  by  the  holder,  must  be  at  his  own  risk  and  must  discharge  the 
drawer,  if  due  presentment  is  not  afterwards  made  at  the  proper  place 
and  due  notice  given  of  the  non-payment  of  the  bill.  *  *  *  The 
bill  of  exchange  in  this  case  was  not  properly  presented  for  payment 
at  the  Bank  of  Upper  Canada,  Port  Hope,  so  as  duly  to  protest  it  for 
non-payment,  as  against  the  drawers,  but  it  should  have  been  presented 
personally  to  the  acceptor,  at  Cobourg.  It  not  having  been  so  presented 
and  notice  of  non-payment  duly  given,  the  drawers  were  not  properly 
charged  by  the  notice  given,  and  are  not  liable  on  the  bill." 

Sec.  228. 

See  notes,  Sec.  130. 


312  NEGOTIABLE   INSTBUMENTS   LAW 

§  228.  What  constitutes  a  general  acceptance.  An  ac- 
ceptance to  pay  at  a  particular  place  is  a  general  acceptance 
unless  it  expressly  states  that  the  bill  is  to  be  paid  there  only 
and  not  elsewhere. 

§  229.  Qualified  acceptance.  An  acceptance  is  quaUfied, 
which  is: 

1.  Conditional,  that  is  to  say,  which  makes  payment  by 
the  acceptor  dependent  on  the  fulfillment  of  a  condition 
therein  stated; 

2.  Partial,  that  is  to  say,  an  acceptance  to  pay  part  only 
of  the  amount  for  which  the  bill  is  drawn; 

3.  Local,  that  is  to  say,  an  acceptance  to  pay  only  at  a 
particular  place; 

4.  Qualified  as  to  time; 

5.  The  acceptance  of  some  one  or  more  of  the  drawees, 
but  not  of  all. 

An  instrument  not  under  seal  may  be  delivered  upon  conditions,  the 
observance  of  which  as  between  the  parties  is  essential  to  its  validity; 
that  the  operation  of  the  instrument  may  be  limited  by  the  conditions  upon 
which  the  delivery  was  made;  that  parol  evidence  of  such  conditions  is 
not  open  to  the  objection  of  varjdng  or  contradicting  a  written  contract, 
and  that  the  rule  applies  to  the  enforcement  of  negotiable  paper,  not  only 
as  between  the  original  parties,  but  as  to  others  having  notice. 

Higgins  V.  Ridgu'ay,  153  N.  Y.  130;  Tradesmen's  National  Bank  v. 
Curtis,  38  App.  Div.  (N.  Y.)  240;  Bookstaver  v.  Jayne,  60  N.  Y.  150. 

The  drawer  or  indorser  of  a  bill  of  exchange,  specifying  the  place  of 
payment  only  by  its  address  to  the  drawee  at  a  city  named,  is  not  dis- 
charged by  its  acceptance  payable  at  a  particular  bank  in  that  city,  as  no 
possible  injury  can  result  to  the  drawer  or  indorser. 

Troy  City  Bank  v.  Lauman,  19  N.  Y.  481. 

A  conditional  acceptance  is  not  enforceable  until  complete  fulfillment 
of  the  conditions. 

Ford  V.  Angelrodt,  88  Am.  Dec.  (Mo.)  174. 

The  following  acceptance  was  held  to  be  conditional:  "Accepted, 
payable  at  Lloyd's  Bank,  Ltd.,  London,  against  indorsed  bills  of  lading 
for  8,417  bushels  of  flax  seed  per  Buffalo  S.  S.  at  New  York  and  Certificate 
of  Insurance,  $8,500." 

Guaranty  Trust  Co.  v.  Grotian,  114  Fed.  Rep.  433;  see  also  Stevens  v. 
Androsocgin,  62  Me.  498. 


ACCEPTANCE  313 

If  a  written  acceptance  was  delivered  to  the  plaintiff  upon  an  oral 
condition,  assented  to  by  him,  that  it  was  not  to  become  operative,  or 
have  any  existence  at  all  as  an  acceptance,  until  the  happening  of  a  condi- 
tion, that  condition,  if  proved,  has  been  held  to  avail  the  defendant,  and 
imder  proper  pleadings  evidence  of  such  conditional  delivery  is  admissible. 

Schmittler  v.  Simon,  114  N.  Y.  176;  Bums  Limiber  Co.  v.  Doyle, 
71  Conn.  742. 

In  a  telegram  to  a  party,  in  relation  to  a  draft,  that  the  person  sending 
the  despatch  "will  pay  B's  draft,  twenty-three  hundred  dollars,  for  stock," 
the  words  "for  stock"  subserve  no  purpose  as  between  the  payee  and 
acceptor.  At  most,  those  words  are  but  an  indication  of  the  nature  of 
the  consideration  as  between  the  drawer  and  acceptor. 

State  Bank  v.  Bradstreet,  89  Neb.  188. 

§  230.  Rights  of  parties  as  to  qualified  acceptance.     The 

holder  may  refuse  to  take  a  qualified  acceptance,  and  if  he 
does  not  obtain  an  unqualified  acceptance,  he  may  treat  the 
bill  as  dishonored  by  non-acceptance.  Where  a  qualified 
acceptance  is  taken,  the  drawer  and  indorsers  are  discharged 
from  liability  on  the  bill,  unless  they  have  expressly  or  im- 
pliedly authorized  the  holder  to  take  a  qualified  acceptance, 
or  subsequently  assent  thereto.  When  the  drawer  or  an 
indorser  receives  notice  of  a  qualified  acceptance,  he  must 
within  a  reasonable  time  express  his  dissent  to  the  holder,  or 
he  will  be  deemed  to  have  assented  thereto. 

Where  the  holder  of  a  bill  of  exchange  transmits  it  to  its  agent  for 
presentment  to  the  drawee,  such  agent  has  no  right  to  receive  anything 
short  of  an  explicit  and  unequivocal  acceptance,  without  giving  notice 
to  the  holder,  as  in  case  of  non-acceptance;  and  he  will  be  liable  for  any 
loss  the  holder  may  sustain  in  consequence  of  his  right  so  to  do.  The 
rule  which  holds  an  agent  to  be  bound  by  the  terms  of  the  contract,  where 
he  fails  to  bind  his  principal,  is  confined  to  cases  where  such  failure  arises 
from  want  of  authority  in  fact  to  make  the  contract.  Where,  therefore, 
a  draft  drawn  by  the  "Empire  Mills"  upon  E.  C.  Hamilton  was  forwarded 
to  a  bank  for  presentment,  and  the  drawee  wrote  across  the  draft  "Ac- 
cepted, Empire  Mills  by  E.  C.  Hamilton,  Treas."  it  was  held,  that  such 
acceptance  bound  neither  the  drawee  nor  the  Empire  Mills,  and  that  the 
bank  having  omitted  to  protest  the  bill  was  liable  to  the  holder,  upon  the 
insolvency  of  the  drawer  and  indorsers,  for  the  amount  of  the  bill. 

Walker  v.  Bank  of  State  of  N.  Y.,  9  N.  Y.  582. 


314  NEGOTIABLE    INSTRUMENTS    LAW 

ARTICLE  13 
Presentment  for  Acceptance 

Section  240.  When  presentment  for  acceptance  must  be  made. 

241.  When  failure  to  present  releases  drawer  and 

endorser. 

242.  Presentment;  how  made. 

243.  On  what  days  presentment  may  be  made. 

244.  Presentment  where  time  is  insufficient. 

245.  When  presentment  is  excused. 

246.  When  dishonored  by  non-acceptance. 

247.  Duty  of  holder  where  bill  not  accepted. 

248.  Rights  of  holder  where  bill  not  accepted. 

§  240.  When  presentment  for  acceptance  must  be  made. 

Presentment  for  acceptance  must  be  made: 

1.  Where  the  bill  is  payable  after  sight,  or  in  any  other 
case  where  presentment  for  acceptance  is  necessary  in  order 
to  fix  the  maturity  of  the  instrument;  or 

2.  Where  the  bill  expressly  stipulates  that  it  shall  be  pre- 
sented for  acceptance ;  or 

3.  Where  the  bill  is  drawn  payable  elsewhere  than  at  the 
residence  or  place  of  business  of  the  drawee. 

In  no  other  case  is  presentment  for  acceptance  necessary 
in  order  to  render  any  party  to  the  bill  liable. 

When  a  bill  is  made  payable  at  a  day  certain  at  a  fixed  time  after  its 
date,  presentment  for  acceptance  before  that  time  is  not  necessary  in 
order  to  charge  the  drawer  or  indorsers;  it  is  to  the  owner's  interest  that 
the  bill  should  be  so  accepted,  as  only  by  accepting  it  does  the  drawee 
become  bound  to  pay  it,  and  until  such  acceptance  the  owner  has  for  his 


PRESENTMENT   FOR   ACCEPTANCE  315 

debtor  only  the  drawer,  and  the  step  is  one  which  a  prudent  man  of  busi- 
ness, ordinarily  careful  of  his  own  interests,  would  take  for  his  protection. 

Allen  V.  Suydam,  17  Wend.  368;  National  Park  Bank  v.  Saitta,  127 
App.  Div.  (N.  Y.)  628. 

A  bill  payable  at  a  fixed  time  from  its  date  may  be  presented  for 
acceptance  at  any  time. 

Bachellor  v.  Priest,  12  Pick.  399;  Oxford  Bank  v.  Davis,  4  Cush.  188. 

Presentment  of  a  negotiable  instrument  for  acceptance  is  distinct 
and  different  presentment  for  payment,  since  presentment  for  payment 
cannot  be  made  until  the  instrument  presented  is  due,  while  presentment 
for  acceptance  must  be  made  before  maturity. 

National  Bank  of  Omaha  v.  Whitmore,  177  Fed.  398. 

All  contracts,  including  negotiable  instruments,  are  as  to  their  valid- 
ity, nature,  interpretation  and  effect  governed  by  the  law  of  the  state 
or  country  where  they  are  made  and  are  to  be  executed.  If,  however, 
they  are  made  in  one  state  or  country,  but  are  to  be  executed  in  another 
state  or  country,  then  they  are  governed  by  the  law  of  the  state  or  country 
where  they  are  to  be  performed.  Presentment  of  negotiable  paper  must, 
therefore,  be  made  in  accordance  with  the  interpretation  as  to  its  character 
extended  to  the  instnmient  by  such  foreign  law. 

Westlake  Inter.  Law,  Sections  110,  163,  169;  Everett  v.  Vendryes, 
19  N.  Y.  436;  Dickinson  v.  Edwards,  77  N.  Y.  573;  U.  National  Bank  v. 
Chapman,  169  N.  Y.  538;  Spies  v.  National  City  Bank,  174  N.  Y.  222; 
Stumpf  V.  Hallahan,  101  App.  Div.  (N.  Y.)  383. 

§  241.  When  failure  to  present  releases  drawer  and 
indorser.  Except  as  herein  otherwise  provided,  the  holder 
of  a  bill  which  is  required  by  the  next  preceding  section  to  be 
presented  for  acceptance  must  either  present  if  for  acceptance 
or  negotiate  it  within  a  reasonable  time.  If  he  fails  to  do  so, 
the  drawer  and  all  indorsers  are  discharged. 

This  section  makes  no  change  in  the  rule  at  common  law. 

Gowen  v.  Jackson,  20  Johns  176;  Robinson  v.  Ames,  20  Johns  146; 
Wallace  v.  Agry,  4  Mason  333;  Phoenix  Ins.  Co.  v.  Allen,  11  Mich.  30; 
Allen  V.  Suydam,  20  Wend.  321. 

Where  a  bank  receives  from  the  owner  a  bill  for  collection,  payable 
either  at  the  place  where  such  bank  carries  on  its  business,  or  at  some 
distant  place,  it  thereby  becomes  the  agent  of  the  owner  for  the  col- 
lection, and  in  the  discharge  of  its  obligations  as  such,  if  the  bill  has  not 
been  accepted,  it  is  boimd  to  present  the  same  for  acceptance  without 


316  NEGOTIABLE   INSTRUMENTS   LAW 

unreasonable  delay,  as  well  as  to  present  the  same  for  payment  when  it 
becomes  payable;  and  if  not  accepted  when  presented  for  that  purpose, 
or  not  paid  when  presented  for  payment,  it  must  take  such  steps  by  pro- 
test and  notice  as  are  necessary  to  charge  the  drawer  and  indorser,  or  it 
will  be  liable  to  its  principal,  the  owner,  for  the  damages  which  the  latter 
sustains  by  any  neglect  to  perform  such  duties,  unless  there  be  some 
agreement  to  the  contrary,  express  or  implied.  And  if  it  be  necessary  or 
convenient  for  the  bank  to  employ  some  other  bank  or  individual  to  collect 
the  bill,  either  at  the  place  of  its  location,  or  at  a  distant  place  where  the 
bill  is  payable,  and  it  does  employ  another  bank  or  individual  to  whom  it 
transmits  the  bill  for  that  purpose,  the  latter  on  receiving  the  bill  and 
entering  upon  the  discharge  of  the  trust,  becomes  the  agent  for  the  former 
bank  and  not  of  the  owner,  and  in  the  absence  of  any  agreement  to  the 
contrary  is  answerable  to  it  for  any  neglect  in  the  discharge  of  its  duties 
as  agent  whereby  the  former  bank  sustains  any  loss  or  damage.  The 
principle  is  that  when  a  trust  is  confided  to  an  agent,  and  he  whose  interest 
is  intrusted  is  damnified  by  the  neglect  of  one  whom  the  agent  employs 
in  the  discharge  of  the  trust,  the  agent  employed  shall  answer  to  the  person 
damnified. 

Montgomery  Co.  Bank  v.  Albany  City  Bank,  9  N.  Y.  460. 

A  draft  payable  on  demand  should  be  presented  for  payment,  and  if 
not  paid,  notice  of  non-payment  should  be  given  to  the  drawer  within  a 
reasonable  time.  Where,  however,  the  drawer  of  a  draft  is  the  treasurer 
of  the  drawee,  a  corporation,  and  he,  with  full  knowledge  of  the  facts,  some 
years  after  the  draft  was  made,  makes  a  partial  payment  thereon  and 
promises  to  pay  a  balance  due  upon  it,  there  is  a  waiver  of  any  defect  in 
presentation  or  notice  of  dishonor. 

Linthicum  v.  Caswell,  19  App.  Div.  (N.  Y.)  341. 

Where  the  payee  of  a  draft,  on  the  day  of  its  receipt  by  him,  and  in 
banking  hours,  presents  and  surrenders  it  to  the  drawee  and  receives 
therefor  the  drawee's  check,  which  check  had  it  been  presented  to  the 
bank  on  that  day,  would  have  been  paid,  and  on  the  next  day  the  check 
is  presented  to  the  bank  for  payment  and  payment  refused,  and  the 
drawers  of  the  draft  at  once  advised  by  letter  of  the  non-payment  of  the 
check.  Held,  that  the  check  could  be  operative  as  only  by  express  agree- 
ment; but  that  although  as  between  the  said  drawee  and  payee,  the  payee 
was  not  bound  to  present  the  check  until  the  day  after  its  receipt  by  him, 
yet  that  between  the  drawers  and  payee  of  the  draft,  it  was  the  duty  of 
the  payee  to  present  the  check  at  once,  and  he  was  guilty  of  laches  in  not 
doing  so,  and  was  chargeable  with  the  consequent  loss. 

Smith  v.  Miller,  43  N.  Y.  171. 


PRESENTMENT   FOR   ACCEPTANCE  317 

A  delay  of  the  mail  is  a  siifficient  excuse  for  the  omission  to  imme- 
diately present  a  bill  for  acceptance,  and  a  presentation  immediately  upon 
its  reception,  is  in  time  to  charge  the  indorser. 

Walch  V.  Blatchley,  6  Wis.  422. 

§  242.  Presentment;  how  made.  Presentment  for  ac- 
ceptance must  be  made  by  or  on  behalf  of  the  holder  at  a 
reasonable  hour,  on  a  business  day,  and  before  the  bill  is  over- 
due, to  the  drawee  or  some  person  authorized  to  accept  or 
refuse  acceptance  on  his  behalf;  and 

1 .  Where  a  bill  is  addressed  to  two  or  more  drawees  who 
are  not  partners,  presentment  must  be  made  to  them  all, 
unless  one  has  authority  to  accept  or  refuse  acceptance  for 
all,  in  which  case  presentment  may  be  made  to  him  only; 

2.  Where  the  drawee  is  dead,  presentment  may  be  made 
to  his  personal  representative; 

3.  Where  the  drawee  has  been  adjudged  a  bankrupt  or  an 
insolvent,  or  has  made  an  assignment  for  the  benefit  of  credit- 
ors, presentment  may  be  made  to  him  or  to  his  trustee  or 
assignee. 

See  Sections  170,  172,  245. 

Presentment  is  a  term  which  requires  but  little  explanation.  Any- 
thing which  amounts  to  a  notification  of  the  holding  of  the  bill,  with  a 
request  to  accept,  accompanied  by  the  bill,  will  amount  to  a  presentment. 
No  formal  presentment  is  necessary,  or  rather  there  is  no  form  for  a 
presentment.  The  bill  explains  itself,  and  the  object  is  understood  in 
the  mercantile  commimity,  when  it  is  shown  and  an  answer  required.  So 
where  bills  are  transmitted  by  letter  to  the  drawee,  this  is  good  present- 
ment, and  an  answer  by  him  that  he  has  not  accepted  will  be  a  refusal, 
which  will  make  it  necessary  to  protest  and  give  notice.  There  is  no 
rule  requiring  that  a  bill  of  exchange  must  be  actually  shown  to  the 
drawee,  in  order  to  effectuate  a  valid  and  binding  acceptance. 

3  R.  C.  L.  1317;  Fisher  v.  Beckwith,  46  Am.  Dec.  174. 

The  reason  for  the  exception  of  partners  in  Subdivision  1  rests  upon 
the  fact  that  partners  are  but  one  person  to  legal  contemplation;  that 
each  partner,  acting  in  such  capacity,  is  not  only  capable  of  performing 
what  all  can  do,  and  of  receiving  and  paying  out  that  which  belongs  to 
all,  but  by  such  acts  necessarily  binds  them  all;  that,  as  incident  to  such 
joint  relations,  all  of  the  partners  are  affected  by  the  knowledge  of  one. 


318  NEGOTIABLE   INSTRUMENTS   LAW 

These  things  do  not  pertain  to  the  relations  of  joint  makers  or  acceptors 
who  are  not  partners.  Hence,  while  a  demand  of  one  partner  is  equivalent 
to  a  demand  of  all,  a  demand  of  one  of  joint  makers,  not  partners,  is  not. 

Story  on  Prom.  Notes,  Sec.  255;  Gates  v.  Beecher,  60  N.  Y.  523. 
As  to  the  diligence  in  making  presentment,  see  Holtz  v.  Boppe,  37 
N.  Y.  634;  Reed  v.  Speer,  107  App.  Div.  (N.  Y.)  144. 

Where  the  maker  of  a  note  calls  on  the  holder  on  the  day  it  becomes 
due  and  informs  him  that  he  is  unable  to  pay,  and  requests  him  to  so 
inform  the  indorsers,  this  is  a  sufficient  demand  and  refusal  to  constitute 
a  dishonor  of  the  note. 

3R.  C.  L.  1171. 

§  243.  On  what  days  presentment  may  be  made.  A  bill 
may  be  presented  for  acceptance  on  any  day  on  which  negoti- 
able instruments  may  be  presented  for  payment  under  the 
provisions  of  sections  one  hundred  and  thirty-two  and  one 
hundred  and  forty-five  of  this  chapter.  When  Saturday  is 
not  otherwise  a  holiday,  presentment  for  acceptance  may  be 
made  before  twelve  o'clock  noon  on  that  day. 

Variant. — The  statutes  of  Arizona,  Kentucky  and  Wisconsin  omit 
the  last  sentence.  The  Colorado  statute  substitutes  for  the  last 
sentence  as  follows:  "When  any  day  is  in  part  a  holiday,  presentment  for 
acceptance  may  be  made  during  reasonable  hours  of  the  part  of  such  day 
which  is  not  a  holiday."  The  North  Carolina  statute  omits  the  word 
* 'otherwise"  in  the  last  sentence. 

§  244.  Presentment  where  time  is  insufficient.  Where 
the  holder  of  a  bill  drawn  payable  elsewhere  than  at  the  place 
of  business  or  the  residence  of  the  drawee  has  not  time  with 
the  exercise  of  reasonable  diligence  to  present  the  bill  for 
acceptance  before  presenting  it  for  payment  on  the  day  that 
it  falls  due,  the  delay  caused  by  presenting  the  bill  for  accept- 
ance before  presenting  it  for  payment  is  excused  and  does  not 
discharge  the  drawers  and  indorsers. 

Reasonable  time  usually  is  a  question  of  law  tmder  the  circumstances 
of  each  case. 

Aymar  v.  Beers,  7  Cow.  705;  Linthicum  v.  Caswell,  19  App.  Div. 
(N.  Y.)  541. 


PKESENTMENT   FOR   ACCEPTANCE  319 

§  245.  When  presentment  is  excused.  Presentment  for 
acceptance  is  excused  and  a  bill  may  be  treated  as  dishonored 
by  non-acceptance  in  either  of  the  following  cases : 

1.  Where  the  drawee  is  dead,  or  has  absconded,  or  is  a 
fictitious  person  or  a  person  not  having  capacity  to  contract 
by  bill; 

2.  Where,  after  the  exercise  of  reasonable  diligence,  pre- 
sentment can  not  be  made; 

3.  Where,  although  presentment  has  been  irregular, 
acceptance  has  been  refused  on  some  other  ground. 

Subdivision  2  is  analogous  to  cases  where  presentment  for  payment 
is  excused.    See  Sec.  142. 

This  section  clears  up  all  doubt  existing  before  its  adoption  in  cases 
where  the  drawee  is  dead. 

See  Dan.  Neg.  Inst.  Sec.  1178. 

Where  on  presentment  of  a  bill  of  exchange  for  payment  at  the 
acceptor's  usual  place  of  business,  within  proper  hours,  the  notary  finds 
the  doors  closed,  he  is  justified — nothing  further  appearing — in  protesting 
the  bill  for  non-payment  without  inquiry  for  the  acceptor  at  his  residence, 
and  without  making  further  effort  to  find  him. 

Sulzbacher  v.  Bank,  86  Tenn.  201 ;  Baumgarden  v.  Reeves,  35  Penn. 
250;  Wisconsin  v.  Chiapella,  23  How.  U.  S.  368. 

The  payee  of  a  check  is  relieved  from  the  necessity  of  making  presen- 
tation and  demand  if  the  drawee  had  no  deposit  in  the  bank. 

Culver  V.  Marks,  122  Ind.  544;  Carroll  v.  Sweet,  128  N.  Y.  19,  13 
L.  R.  A.  43. 

§  246.  When  dishonored  by  non-acceptance.  A  bill  is 
dishonored  by  non-accdptance : 

1 .  When  it  is  duly  presented  for  acceptance,  and  such  an 
acceptance  as  is  prescribed  by  this  chapter  is  refused  or  can 
not  be  obtained;  or 

2.  When  presentment  for  acceptance  is  excused  and  the 
bill  is  not  accepted. 


320  NEGOTIABLE   INSTRUMENTS   LAW 

§  247.  Duty  of  holder  where  bill  not  accepted.    Where  a 

bill  is  duly  presented  for  acceptance  and  is  not  accepted 
within  the  prescribed  time,  the  person  presenting  it  must 
treat  the  bill  as  dishonored  by  non-acceptance  or  he  loses  the 
right  of  recourse  against  the  drawer  and  indorsers. 

Where  a  bill  is  made  payable  at  a  day  certain  at  a  fixed  time  after 
its  date,  presentment  for  acceptance  before  that  time  is  not  necessary  in 
order  to  charge  the  drawer  or  indorsers;  it  is  the  owner's  interest  that 
the  bill  shovild  be  accepted,  as  only  by  accepting  it  does  the  drawee  become 
botmd  to  pay  it,  and  until  such  acceptance  the  owner  has  for  his  debtor 
only  the  drawer,  and  the  step  is  one  which  a  prudent  man  of  business, 
ordinarily  careful  of  his  own  interests,  would  take  for  his  protection. 

Allen  V.  Suygam,  17  Wend.  368;  National  Park  Bank  v.  Saitta,  127 
App.  Div.  (N.  Y.)  628. 

§  248.  Rights  of  holder  where  bill  not  accepted.  When 
a  bill  is  dishonored  by  non-acceptance,  an  immediate  right  of 
recourse  against  the  drawers  and  indorsers  accrues  to  the 
holder  and  no  presentment  for  payment  is  necessary. 


PROTEST  o^l 

ARTICLE  14 
Protest 

Section  260.  In  what  cases  protest  necessary. 

261.  Protest;  how  made. 

262.  Protest;  by  whom  made. 

263.  Protest;  when  to  be  made. 

264.  Protest;  where  made. 

265.  Protest  both  for  non-acceptance  and  non-pay- 

ment. 

266.  Protest    before    maturity    where    acceptor    in- 

solvent. 

267.  When  protest  dispensed  with. 

268.  Protest  where  bill  is  lost  or  destroyed  or  wrongly 

detained. 

§  260.  In  what  cases  protest  necessary.  Where  a  foreign 
bill  appearing  on  its  face  to  be  such  is  dishonored  by  non- 
acceptance,  it  must  be  duly  protested  for  non-acceptance,  and 
where  such  a  bill  which  has  not  previously  been  dishonored  by 
non-acceptance  is  dishonored  by  non-payment,  it  must  be 
dtily  protested  for  non-payment.  If  it  is  not  so  protested,  the 
drawer  and  indorsers  are  discharged.  Where  a  bill  does  not 
appear  on  its  face  to  be  a  foreign  bill,  protest  thereof  in  case  of 
dishonor  is  unnecessary. 

As  to  the  distinction  between  foreign  and  inland  bills  see  Section  213. 

The  failure  to  protest  a  foreign  bill  on  the  day  it  was  dishonored,  as 
required  by  Section  263,  operates  under  this  section  to  discharge  the  maker 
and  indorsers  from  liability. 


322  NEGOTIABLE    INSTRUMENTS    LAW 

Amsick  v.  Rogers,  103  App.  Div.  (N.  Y.)  429;  Freese  v.  Brownell,  35 
N.  J.  L.  285. 

Where  a  bill  does  not  appear  on  its  face  to  be  a  foreign  bill,  protest 
thereof  in  case  of  dishonor  is  unnecessary. 

Williams  v.  Paintsville  Bank,  137  S.  W.  535. 

There  are  several  reasons  why  protest  as  provided  by  this  section  is 
necessary:  (a)  for  the  sake  of  imiformity  in  international  transactions; 
(b)  because  it  affords  satisfactory  evidence  of  dishonor  to  the  drawer, 
who  from  his  residence  abroad,  might  experience  a  difficulty  in  making 
inquiries  on  the  subject  and  be  compelled  to  rely  on  the  representations 
of  the  holder;  (c)  because,  as  foreign  courts  give  credit  to  the  acts  of  a 
public  fimctionary,  the  protest  affords  the  most  satisfactory  evidence  to 
charge  an  antecedent  party. 

Byles  256. 

While  as  to  certain  details,  such  as  the  days  of  grace,  the  manner  of 
making  the  protest,  and  the  persons  by  whom  the  protest  shall  be  made, 
the  law  or  custom  of  the  place  where  it  is  payable  will  govern ;  the  necessity 
of  making  a  demand  and  protest,  and  circumstances  under  which  the 
same  may  be  required  or  dispensed  with,  are  incidents  of  the  original 
contract  which  are  governed  by  the  law  of  the  place  where  the  bill  is 
drawn,  rather  than  the  place  where  it  is  payable. 

Amsick  v.  Rogers,  189  N.  Y.  258;  Price  v.  Page,  24  Mo.  65;  Hunt  v. 
Standart,  15  Ind.  33,  38;  Raymond  v.  Holmes,  11  Texas,  54,  59;  Powers  v. 
Lynch,  3  Mass.  77,  80. 

The  damages  recoverable  by  the  payee  of  a  negotiable  foreign  bill 
of  exchange  protested  for  non-payment  against  the  drawer,  may  be  deemed 
to  be  made  up  as  follows:  (1)  The  face  of  the  bill;  (2)  Interest  thereon; 
(3)  Protest  fees;  (4)  Re-exchange,  i.e.,  the  additional  expense  of  procuring 
a  new  bill  for  the  same  amoimt  payable  in  the  same  place  on  the  day  of 
dishonor;  or  a  percentage  in  lieu  of  re-exchange  where  it  is  prescribed  by 
statute. 

Pavenstedt  v.  N.  Y.  Life  Ins.  Co.,  203  N.  Y.  95;  2  Sedgwick  on 
Damages  (8th  ed.)  700;  Byles  on  Bills,  418;  Bank  of  United  States  v. 
United  States,  2  How.  (U.  S.)  745;  Lee  &  Co.  v.  Walbridge,  19  N.  Y.  134. 

The  provisions  of  this  section,  which  require  protest  and  due  notice 
as  a  condition  of  the  liability  of  both  the  drawer  and  indorsers  of  a  foreign 
bill  of  exchange,  apply  to  a  check  drawn  and  given  in  the  State  of  New 
York  on  a  bank  in  Austria,  and  the  failure  of  the  holder  to  protest  the 
check  discharges  the  drawer. 


PEOTEST  323 

Casper  v.  Kuhns,  79  Misc.  411. 

Formal  protest  by  a  notary  where  the  instrument  is  not  a  foreign 
bill  is  not  necessary  to  hold  the  indorser.  It  is  mere  proof.  What  is 
essential  is  presentment  and  demand  at  the  time  and  place  provided  for 
in  the  instrument,  followed  by  notice  to  the  indorser  of  such  presentment, 
demand  and  non-payment. 

McBride  v.  Illinois  National  Bank,  138  App.  Div.  346. 

§  261.  Protest;  how  made.  The  protest  must  be  annexed 
to  the  bill,  or  must  contain  a  copy  thereof,  and  must  be  under 
the  hand  and  seal  of  the  notary  making  it,  and  must  specify: 

1.  The  time  and  place  of  presentment; 

2.  The  fact  that  presentment  was  made  and  the  manner 
thereof ; 

3.  The  cause  or  reason  for  protesting  the  bill; 

4.  The  demand  made  and  the  answer  given,  if  any,  or 
the  fact  that  the  drawee  or  acceptor  cotild  not  be  found. 

Protest  is  a  solemn  declaration,  written  by  a  notary  public  under  a 
fair  copy  of  a  bill  or  note,  stating  that  acceptance  has  been  refused,  the 
reasons,  if  any,  therefor,  and  that  the  bill  or  note  has  been  protested. 
Protest,  strictly  speaking,  is  absolutely  necessary  only  in  case  of  foreign 
bills,  i.e.,  while  it  is  necessary  to  give  notice  of  dishonor  of  all  negotiable 
paper,  this  need  be  done  before  a  notary  only  in  case  of  foreign  bills. 

But  by  Section  189,  ante,  protest  is  authorized  in  the  case  of  all 
negotiable  instruments,  and  it  is  the  usual  way  to  give  notice  of  dishonor. 
This  method  of  notice  has  great  advantages  because  the  certificate  of  the 
notary  is  usually  prima  facie  evidence.  The  form  or  contents  of  a  protest 
is  the  time  and  place  of  presentment,  the  demand  of  payment,  the  fact 
and  manner  of  presentment,  the  fact  of  dishonor,  the  name  of  the  parties 
by  whom  and  to  whom  presentment  was  made.  A  protest  is  the  formal 
document;  notice  of  protest  is  simply  notice  that  the  instrument  has  been 
dishonored  and  protested.  Protest  for  better  security  is  where  the 
holder  protests  when  the  drawee  of  the  bill  of  exchange  has  absconded 
before  the  day  of  maturity,  or  where  the  drawer  or  acceptor  of  a  foreign 
bill  has  become  insolvent.  It  is  not  necessary  in  order  to  bind  the  drawer 
or  indorser,  and  seems  to  be  principally  used  to  enable  drawer  and  indorser 
to  provide  for  payment  when  due. 

Chitty  on  Bills,  383. 

The  notice  should  positively  identify  the  paper. 

Home  Ins.  Co.  v.  Green,  19  N.  Y.  518. 


324  NEGOTIABLE    INSTKUMENTS    LAW 

A  notice  of  protest  to  an  indorser,  dated  the  day  the  note  is  payable, 
and  which  states  the  amount  and  the  names  of  the  maker  and  indorser, 
is  suiBcient  description  of  the  note,  in  the  absence  of  proof  that  any  other 
note  existed  to  which  the  notice  might  refer.  A  statement  in  such  notice, 
that  the  note  is  protested  for  non-payment,  is  sufficient  notice  of  a  present- 
ment and  demand  of  pa^inent  at  the  time  and  place  for  payment. 

Youngs  V.  Lee,  12  N.  Y.  551. 

Protest  should  designate  or  identify  the  instrument  to  which  it  refers, 
which  is  usually  done  by  putting  on  it  a  copy  thereof,  but  if  the  original 
instrument  be  annexed  and  referred  to  in  the  body  of  the  protest,  it  is 
sufficient. 

Fulton  V.  Maccracken,  81  Am.  Dec.  (Md.)  620. 

A  notary  omitting  to  affix  his  seal  may  supply  the  defect  by  attaching 
his  seal  after  objection  has  been  made  to  its  absence. 
RindskoflE  v.  Malone,  74  Am.  Dec.  (la.)  367. 

The  certificate  must  be  executed  under  the  seal  of  the  notary 
making  it. 

Pierce  v.  Indseth,  106  U.  S.  546. 

According  to  the  weight  of  authority  a  notarial  seal  renders  a  certifi- 
cate of  protest  evidence  in  foreign  countries,  and  in  the  absence  of  such  a 
seal  extraneous  evidence  must  be  given  of  the  authority  of  the  officer  to 
take  the  protest. 

London  R.  P.  Bank  v.  Carr,  54  Misc.  94;  Bank  of  Rochester  v.  Gray, 
2  Hill  227. 

A  notary's  protest  is  not  conclusive,  but  only  prima  facie  evidence  of 
such  facts  as  are  proper  to  be  stated  in  it;  it  may  always  be  rebutted  by 
other  evidence  showing  how  the  demand  was  made,  or  that  proper  diligence 
was  not  used  to  make  it,  or  that  there  was  a  permanent  abandonment  and 
removal  to  another  place  of  business  in  the  same  city. 

3  R.  C.  L.  1339;  Clough  v.  Holden,  115  Mo.  336;  Sulzbacher  v.  Bank, 
6  S.  W.  Tenn.  129;  Tate  v.  Sullivan,  96  Am.  Dec.  (Md.)  597;  Rosen  v. 
Carroll,  16  S.  W.  (Tenn.)  66;  12  L.  R.  A.  727;  Johnson  v.  Brown,  154 
Mass.  105. 

The  notice  of  protest  need  not  be  signed  manually  by  the  notary  if 
his  name  appears  at  the  foot  of  the  notification.  It  as  fully  acquaints 
the  indorser  of  the  dishonor  as  would  the  manuscript  signature  of  a  person 
whose  handwriting  he  did  not  know;  and  it  certainly  is  not  expected  that 
the  indorser  should  know  the  handwriting  of  the  notary. 

Bank  of  Cooperstown  v.  Woods,  28  N.  Y.  567. 


PROTEST  325 

A  certificate  of  protest  in  the  following  form:  ''I,  John  Doe,  a  notary 
public,  do  hereby  certify  that  I  have  this  day  protested  for  non-payment, 
the  annexed  bill,"  even  though  properly  dated  and  signed,  is  insufficient; 
a  specification  of  the  place  and  manner  of  presentment,  and  the  person 
to  whom  presentment  was  made  being  necessary  to  bind  the  indorsers. 

Union  Bank  v.  Williams  Co.,  117  Mich.  535;  People's  Bank  v.  Brooke, 
31  Md.  7;  Duckert  v.  Von  Lileinthal,  11  Wis.  55. 

The  protest  of  a  promissory  note,  stating  that  the  notary  went  with 
the  original  note  and  demanded  payment  thereof,  at  the  promisor's  office 
at  a  place  named,  and  that  the  person  in  charge  answered  "no  funds"  is 
sufficient  in  form. 

Legg  V.  Vinal,  165  Mass.  555. 

A  certificate  of  a  notary,  which  states  that  he  presented  a  note  for 
payment  at  Montello  and  demanded  payment,  which  was  refused,  but  did 
not  state  to  whom  or  at  what  place  in  the  town  it  was  presented,  does  not 
show  such  a  presentation  to  the  maker  as  will  bind  the  indorser. 

Duckert  v.  Leinthal,  11  Wis.  56. 

CERTIFICATE  OF  PROTEST 

State  of "j 

[ss. 
County  of J 

Be  it  KNOWN,  that  on  the day 

of ,   in   the   year   of  our    Lord    nineteen 

hundred  and  seventeen,  I,  , 

a  Notary  Public,  duly  commissioned  and  sworn,  and  residing  at 

,  in  said  County  and  State,  at  the  request 

of Bank, 

of ,  went  with  the  original  instru- 
ment, which  is  hereto  attached  to 

and  presented  it  to  the  person  in  charge,  and  demanded  payment  thereon, 

which  was  refused;  because 

Whereupon,  I,  the  said  Notary,  at  the  request  of  the  aforesaid 

Bank    did    PROTEST,    and    by 

these  presents  do  SOLEMNLY  PROTEST,  as  well  against  the  makers  of 
said  instrument,  the  indorsers  thereof  as  all  others  whom  it  doth  or  may 
concern,  for  exchange,  re-exchange  and  all  costs,  charges,  damages  and  interest 
already  incurred  by  reason  of  the  non-payment  or  non-acceptance  of  said 
instrument. 


326  NEGOTIABLE   INSTRUMENTS   LAW 

And  I,  the  said  Notary,  do  hereby  certify  that  due  notice  of  such  protest 

as  provided  by  law  was  put  in  the  post  office  at , 

as  follows: 

Notice  for  John  Doe  &°  Co.,  Boston,  Mass. 

Notice  for  Richard  Roe,  Chicago,  III. 

Notice  for 

Notice  for 

Each  of  the  above  named  places  being  the  reputed  place  of  residence  of 
the  person  to  whom  such  notice  was  directed. 

IN  TESTIMONY  WHEREOF,  I  have  hereunto  set  my  hand  and 
affixed  my  official  seal  the  day  and  year  first  above  written. 


Notary  Public. 

NOTICE  OF  PROTEST 

State  of 1 

iss. 

County  of ] 

19. 

To 


You  will  please  take  notice  that  a for 

dollars,  dated , 

payable after drawn  by 

in  favor  of 

on {accepted  by) 

endorsed  by  you  and  due has  been  pro- 
tested by  me  on  this  day  for  non- ,  after  having  made 

legal  demand  for  the  same. 

I  hereby,  at  the  request  of the  holder 

thereof,  notify  you  that  the  said  holder  looks  to  you  for  payment,  damages, 
interest  and  costs. 

Yours,  etc., 


Notary  Public. 

§  262.  Protest;  by  whom  made.     Protest  may  be  made 


by: 


1 .  A  notary  public ;  or 

2.  By  any  respectable  resident  of  the  place  where  the  bill 
is  dishonored,  in  the  presence  of  two  or  more  credible  witnesses. 


PROTEST 


327 


Variant. — The  word  "responsible"  is  substituted  for  "respectable" 
in  Subdivision  2  in  the  Washington  statute. 


A  cashier  of  a  bank  who  is  a  notary  may  legally  protest  his  own  note 
which  has  been  discounted  by  the  bank. 

Dykman  v.  Northbridge,  1  App.  Div.  (N.  Y.)  26. 

And  so  too  may  a  stockholder  or  an  officer  of  a  bank,  who  is  a  notary, 
protest  paper  belonging  to  the  bank. 

Moreland  v.  Citizens  Bank,  97  Ky.  211;  Nelson  v.  Bank,  69  Fed. 
798;  Patton  v.  Bank  of  Lafayette,  53  S.  E.  (Ga.)  664;  Herkimer  Co. 
Bank  v.  Cox,  21  Wend.  (N.  Y.)  119. 

A  notary  cannot  delegate  his  authority,  he  must  make  the  presentment 
and  demand  himself,  and  if  these  duties  are  performed  by  his  clerk  the 
protest  is  invalid. 

Carmichael  v.  Bank  of  Penn.,  35  Am.  Dec.  408. 

§  263.  Protest;  when  to  be  made.  When  a  bill  is  pro- 
tested, such  protest  must  be  made  on  the  day  of  its  dishonor, 
unless  delay  is  excused  as  herein  provided.  When  a  bill  has 
been  duly  noted,  the  protest  may  be  subsequently  extended  as 
of  the  date  of  the  noting. 

It  is  not  essential  that  the  certificate  be  made  out  at  the  time  of 
protest.  If  a  note  or  memorandum  is  made  by  the  notary  at  the  time  of 
the  presentment  and  dishonor  of  the  instrument  showing  what  was  done, 
a  certificate  thereafter  drawn  up  from  that  memorandimi  would  be  suffi- 
cient even  though  six  months  elapsed. 

Union  National  Bank  v.  Williams,  117  Mich.  535;  Byles  on  Bills,  257; 
Mooreland  v.  Citizens  Bank,  114  Ky.  577;  71  S.  W.  520;  61  L.  R.  A.  900. 

Where  an  instrument  falls  due  on  Sunday,  pa>Tnent  thereof  cannot 
be  required,  nor  protest  made,  on  the  preceding  Saturday,  but  present- 
ment and  protest  should  be  made  on  the  following  Monday  vmless  it  is  a 
legal  holiday. 

Hirshfield  v.  Ft.  Worth  National  Bank,  18  S.  W.  (Tex.)  743;  15 
L.  R.  A.  639. 

The  failure  to  protest  a  foreign  bill  on  the  day  it  was  dishonored,  as 
required  by  this  section,  operates  vmder  Section  260  to  discharge  the 
maker  and  indorsers. 

Amsick  v.  Rogers,  103  App.  Div.  (N.  Y.)  429. 

§  264.  Protest;  where  made.  A  bill  must  be  protested 
at  the  place  where  it  is  dishonored,  except  that  when  a  bill 


328  NEGOTIABLE    INSTRUMENTS    LAW 

drawn  payable  at  the  place  of  business  or  residence  of  some 
person  other  than  the  drawee,  has  been  dishonored  by  non- 
acceptance,  it  must  be  protested  for  non-payment  at  the  place 
where  it  is  expressed  to  be  payable,  and  no  further  present- 
ment for  payment  to,  or  demand  on,  the  drawee  is  necessary. 

Protest  is  generally  to  be  made  at  the  place  where  the  dishonor  occxirs. 
If  a  bill  is  drawn  on  a  person  in  one  place,  and  is  payable  in  another,  then 
it  has  been  held  that  the  holder  has  his  election  to  cause  the  bill  to  be 
protested  for  non-payment  either  at  the  place  of  payment  or  at  the  place 
where  the  drawee  resides. 

3  R.  C.  L.  1322;  43  Am.  Dec.  221;  Byles  on  Bills,  257;  Dan.  Neg. 
Inst.  Section  935. 

§  265.  Protest  both  for  non-acceptance  and  non-pay- 
ment. A  bill  which  has  been  protested  for  non-acceptance 
may  be  subsequently  protested  for  non-payment. 

§  266.  Protest  before  maturity  where  acceptor  insolvent. 

Where  the  acceptor  has  been  adjudged  a  bankrupt  or  an  in- 
solvent or  has  made  an  assignment  for  the  benefit  of  creditors, 
before  the  bill  matures,  the  holder  may  cause  the  bill  to  be 
protested  for  better  security  against  the  drawer  and  indorsers. 

See  notes.  Section  260. 

§  267.  When  protest  dispensed  with.  Protest  is  dispensed 
with  by  any  circumstances  which  would  dispense  with  notice 
of  dishonor.  Delay  in  noting  or  protesting  is  excused  when 
delay  is  caused  by  circumstances  beyond  the  control  of  the 
holder  and  not  imputable  to  his  default,  misconduct,  or 
negligence.  When  the  cause  of  delay  ceases  to  operate,  the 
bill  must  be  noted  or  protested  with  reasonable  diligence. 

Generally  an  excuse  for  non-protest  will  be  such  as  arises  from  circum- 
stances not  affecting  the  individual  particularly,  but  having  a  general 
influence  over  the  whole  community  so  as  to  prevent  and  impede  the 
transaction  of  business,  as,  for  instance,  the  breaking  out  of  a  general 
war,  or  the  prevalence  of  a  malignant  epidemic,  or  an  overwhelming 
calamity. 

For  a  discussion  on  the  subject,  see  Dan.  Neg.  Int.,  Section  730. 


PEOTESI  329 

As  in  the  case  of  presentment  for  pa)nTient  and  notice  of  dishonor, 
protest  may  be  waived  by  the  indorser,  either  orally  or  in  writing,  or  by 
acts  clearly  calculated  to  mislead  the  holder  and  prevent  him  from  treating 
the  instrument  as  he  otherwise  would. 

3  R.  C.  L.  1320;  Burgettstown  National  Bank  v.  Nill,  213  Pa.  St.  456; 
Manning  v.  Maroney,  87  Ala.  563;  6  So.  343;  3  L.  R.  A.  1079;  Baker  v. 
Scott,  29  Kan.  136;  44  Am.  Rep.  628;  Rose  v.  Kurd,  71  N.  Y.  14;  Bellinger 
V.  Glenn,  80  Ala.  190;  60  Am.  Rep.  98. 

§  268.  Protest  where  bill  is  lost  or  destroyed  or  wrongly 
detained.  Where  a  bill  is  lost  or  destroyed  or  is  wrongly 
detained  from  the  person  entitled  to  hold  it,  protest  may  be 
made  on  a  copy  or  written  particulars  thereof. 

The  defendant  bank  received  checks  from  a  depositor  and  credited 
them  to  his  general  account.  The  checks  were  forwarded  for  collection 
but  were  lost  in  the  mail.  After  the  failure  of  the  drawer  of  the  checks, 
the  defendant  bank  charged  them  back  against  the  depositor's  account. 
It  was  held  that  the  defendant  was  not  entitled  to  charge  the  checks  back 
in  this  manner,  and  that  it  must  bear  the  loss  itself. 

Heinrich  v.  Middletown  Bank,  164  App.  Div.  960;  112  N.  E.  Rep. 
531;  affirmed  by  Court  of  Appeals. 

In  Albi  v.  Bank  of  Evansville,  124  Wis.  78,  the  court  held,  "Upon 
learning  that  its  attempted  presentment  by  mail  had  failed,  and  that  the 
check  was  lost,  at  least  for  the  purpose  of  immediate  presentment,  defen- 
dant had  the  opportunity  and  owed  the  duty  to  at  once  make  substituted 
presentment  and  demand  by  means  of  a  copy  of  sufficient  description, 
and  in  case  of  non-payment  to  give  notice  to  the  indorser. 

Where  a  note  is  lost,  a  tender  of  a  bond  of  indemnity  is  not  necessary 
to  a  right  of  action  on  the  note. 

Church  V.  Stevens,  56  Misc.  572.  See  also,  Shipsey  v.  Bowery  Bank, 
59  N.  Y.  487;  Hinsdale  v.  Miles,  5  Cobb.  336. 

INDEMNITY  BOND  TO  BANK  IN  PAYING  LOST  DRAFT 

KNOW  ALL  MEN  BY  THESE  PRESENTS, 

That  we,  of 

principal,   and of > 

as  surety,  are  held  and  firmly  bound  unto 

Bank  in  the  sum  of  $ ,  lawful  money  of  the  United 

States,  to  be  paid  to  said Bank,  or 


330  NEGOTIABLE   INSTBUMENTS   LAW 

Us  certain  attorneys  or  assigns,  to  which  payment  well  and  truly  to  be  made, 
we  bind  ourselves,  our  heirs,  executors  and  administrators,  firmly  by  these 
presents. 

Sealed  with  our  seals  and  dated  the day  of 

,  19 

THE  CONDITION  of  this  obligation  is  such  that  whereas  the  said 

Bank  at  the  request  of 

did,  on  or  about  the day  of , 

igiy ,  issue  its  draft  for  $ on  the 

Bank  of ,  dated 

the day   of iQi?,   <^'>^d   payable 

to  the  order  of ,  which  draft  has 

been  lost  before  presentment  for  payment,  and  Whereas,  the  said 

Bank  has  issued  its  duplicate  draft  in 

lieu  of  said  lost  draft  upon  the  agreement  of  this  bond  of  indemnity  be  given. 

Now  therefore,  if  the  said , 

principal,  and surety,  their  execu- 
tors or  administrators,  or  either  of  them,  shall  and  do  deliver  the  said  draft 
unpaid  when  found  to  the  said  Bank  or  its  successors  or  assigns  to  be  can- 
celled, and  until  the  same  shall  be  so  delivered  and  cancelled,  to  save,  keep 
harmless  and  indemnify  the  bank  or  its  assigns  of  and  from  any  obligation 
incurred  by  the  issuance  of  said  draft,  and  from  all  actions,  suits,  payments, 
costs  and  damages  for  or  by  reason  thereof,  then  this  obligation  to  be  void  and 

of  no  effect,  otherwise  to  remain  in  full  force  and  virtue. 

(Seal) 

{Seal) 

State  of I 

County  of \  ss. 

City  of J 

On  this day  of. 19 1 

before  me,  the  subscriber,  personally  appeared 

and ,  to  me  known  to  be  the  same 

persons  who  executed  the  foregoing  instrument,  and  they  each  acknowledged 
to  me  that  they  executed  the  same. 

Notary  Public. 


PROTEST  331 

INDEMNITY  BOND  FOR  PAYING  A  LOST  NOTE 
KNOW  ALL  MEN  BY  THESE  PRSENTS, 

Thai  we,  A,  principal,  of and  B, 

surety,    of fl^«    held    and    firmly 

bound  unto  C,  of in  the  penal  sum  of 

,  lawful  money  of  the  United  States,  to  be  paid  to 

the  said  C,  his  executors,  administrators  or  assigns,  for  which  payment  well 
and  truly  to  be  made,  we  bind  ourselves,  our  heirs,  executors  and  adminis- 
trators, firmly  by  these  presents. 

Sealed  with  our  seals  and  dated  the day  of 

19 

THE  CONDITION  of  this  obligation  is  such  that  whereas  A,  principal, 

is  the  owner  of  a  certain  promissory  note,  dated  the day  of 

,  for  $ ,   and  payable 

days  after  date,  signed  and  made  by 

and  payable  to  the  order  of ,  due 

,  and    which    said   note    has    been   lost 

and  cannot  now  be  produced  by  him  and 

Whereas,  said  C,  has  this  day  paid  to  said  A,  the  full  amount  due  theron 
upon  the  agreement  that  this  bond  of  indemnity  would  be  given  and  that  said 
A,  principal,  and  B,  surety,  will  indemnify  and  save  C  harmless,  and  will 
deliver  up  said  note  to  C,  when  found. 

Now,  THE  CONDITION  of  this  obligation  is  such  that  the  above 
bounden  A,  principal,  and  B,  surety,  their  heirs,  executors,  administrators 
or  any  of  them  shall  well  and  truly  indemnify  and  save  harmless  the  said  C, 
his  executors  and  administrators  from  and  against  any  claim  on  said  note 
and  any  and  all  damages,  costs,  charges,  actions  or  suits  by  reason  thereof, 
and  also  deliver  or  cause  said  note  to  be  delivered  to  said  C,  if  found,  then  this 
obligation  to  be  void,  otherwise  to  remain  in  full  force  and  virtue. 

{Seal) 

{Seal) 

{Acknowledgement  as  in  the  foregoing  form) 


332  NEGOTIABLE    INSTRUMENTS    LAW 

ARTICLE  15 
Acceptance  for  Honor 

Section  280.  When  bill  may  be  accepted  for  honor. 

281.  Acceptance  for  honor;  how  made. 

282.  When  deemed  to  be  an  acceptance  for  honor  of 

the  drawer.' 

283.  Liability  of  acceptor  for  honor. 

284.  Agreement  of  acceptor  for  honor. 

285.  Maturity  of  bill  payable  after  sight;  accepted 

for  honor. 

286.  Protest  of  bill  accepted  for  honor  or  containing  a 

reference  in  case  of  need. 

287.  Presentment  for  payment  to  acceptor  for  honor; 

how  made. 

288.  When  delay  in  making  presentment  is  excused. 

289.  Dishonor  of  bill  by  acceptor  for  honor. 

Note. — An  acceptance  supra  protest,  or  for  honor,  is  when,  upon  the 
refusal  of  the  original  drawee  to  accept  the  bill,  a  stranger  accepts  for  the 
honor  of  some  one  of  the  parties  thereto.  He  declares  before  a  notary 
public  that  he  accepts  the  protested  bill  and  that  he  will  pay  it  at  the 
appointed  time;  he  then  subscribes  his  name  with  the  words,  "accepted 
supra  protest  for  the  honor  of  A.  B."  The  nature  of  the  acceptor's  under- 
taking in  that  respect  is  like  an  indorser,  to  the  effect  that  if  the  drawee 
does  not  pay  the  bill  when  again  presented  to  him,  he  will  pay  upon  ma- 
turity. Any  third  person  may  accept  supra  protest;  even  the  drawee, 
imless  he  is  boimd  to  accept  the  bill  in  the  first  instance  in  good  faith  for 
the  benefit  of  all  parties.  The  holder  of  a  bill  accepted  supra  protest 
should  again  protest  it  for  non-payment,  and  then  present  it  to  the  ac- 
ceptor supra  protest;  if  he  refuses  to  pay,  there  must  be  another  formal 
protest  stating  presentment  to  original  drawee  and  his  non-payment,  the 
protest  of  the  bill  and  its  presentment  to  the  acceptor  supra  protest,  the 


ACCEPTANCE   FOE   HONOR  383 

demand  of  payment  from  him  and  protest  for  his  non-payment.  A  notice 
must  be  forthwith  given  to  the  drawer  and  the  indorsers.  The  acceptor 
supra  protest,  it  is  said,  does  not  admit  the  genuineness  of  the  signature 
of  any  party,  and,  therefore,  he  may  recover  money  paid  if  the  bills  turn 
out  to  be  forgery.  This  is  not  presumed  to  be  so  if  the  bill  has  passed 
into  the  hands  of  a  bona  fide  purchaser. 

The  subsequent  sections  are  taken  from  the  EngHsh  Bills  of  Exchange 
Act,  Sections  65  to  68. 

§  280.  When  bill  may  be  accepted  for  honor.  Where  a 
bill  of  exchange  has  been  protested  for  dishonor  by  non- 
acceptance,  or  protested  for  better  security  and  is  not  overdue, 
any  person  not  being  a  party  already  liable  thereon,  may, 
with  the  consent  of  the  holder,  intervene  and  accept  the  bill 
supra  protest  for  the  honor  of  any  party  liable  thereon  or  for 
the  honor  of  the  person  for  whose  account  the  bill  is  drawn. 
The  acceptance  for  honor  may  be  for  part  only  of  the  sum  for 
which  the  bill  is  drawn;  and  where  there  has  been  an  accept- 
ance for  honor  for  one  party,  there  may  be  a  further  acceptance 
by  a  different  person  for  the  honor  of  another  party. 

§  281.  Acceptance  for  honor;  how  made.    An  acceptance 

for  honor  supra  protest  must  be  in  writing  and  indicate  that 
it  is  an  acceptance  for  honor,  and  must  be  signed  by  the  acceptor 
for  honor. 

§  282.  When  deemed  to  be  an  acceptance  for  honor  of 
the  drawer.  Where  an  acceptance  for  honor  does  not  expressly 
state  for  whose  honor  it  is  made,  it  is  deemed  to  be  an  accept- 
ance for  the  honor  of  the  drawer. 

§  283.  Liability  of  acceptor  for  honor.  The  acceptor  for 
honor  is  liable  to  the  holder  and  to  all  parties  to  the  bill  sub- 
sequent to  the  party  for  whose  honor  he  has  accepted. 

As  to  the  rights  of  an  acceptor  for  honor,  he  has  recourse  against 
the  party  for  whose  honor  the  acceptance  was  made,  and  all  parties  against 
whom  the  latter  would  have  recourse,  for  all  damages  incurred  by  reason 
of  his  acceptance.  If  the  drawee  accepts  supra  protest,  he  stands  in  the 
position  of  an  indorsee,  paying  full  value  for  it,  has  the  same  remedies 


334  NEGOTIABLE    INSTRUMENTS    LAW" 

to  which  an  indorsee  would  be  entitled  against  all  prior  parties,  and  can 
of  course,  sue  the  drawer  or  indorser. 

Swope  V.  Rose,  40  Pa.  St.  186,  80  Am.  Dec.  567. 

§  284.  Agreement  of  acceptor  for  honor.  The  acceptor 
for  honor  by  such  acceptance  engages  that  he  will  on  due 
presentment  pay  the  bill  according  to  the  terms  of  his  accept- 
ance, provided  it  shall  not  have  been  paid  by  the  drawee, 
and  provided  also,  that  it  shall  have  been  duly  presented  for 
payment  and  protested  for  non-payment  and  notice  of  dis- 
honor given  to  him. 

In  order  to  render  the  acceptor  supra  protest  liable,  the  holder  is 
bound  in  the  first  instance  to  demand  payment  of  the  original  drawee 
when  the  bill  becomes  due,  and  if  he  fails  to  pay,  it  must  then  be  presented 
in  due  time  to  the  acceptor  supra  protest.  If  the  latter  refuses  to  pay 
on  such  presentment,  there  must  be  another  formal  protest,  stating  the 
presentment  for  payment  to  the  drawee,  the  protest  for  his  non-payment, 
the  presentment  of  the  bill  and  acceptance  to  the  acceptor  supra  protest, 
demand  of  payment  of  him  and  the  protest  for  his  non-payment;  and 
notice  thereof  must  be  forthwith  forwarded  to  the  drawer  and  indorsers. 
If  the  acceptance  is  for  the  honor  of  a  particular  party,  and  the  holder 
takes  it,  he  cannot  sue  that  party  before  maturity  of  the  bill,  and  its 
dishonor  by  such  acceptor ;  and  if  the  acceptance  is  generally  for  the  honor 
of  the  bill,  the  holder  cannot  sue  any  of  the  parties  before  its  maturity 
and  dishonor.  The  acceptance  inures  to  the  benefit  of  all  the  parties 
subsequent  to  him  and  for  whose  honor  it  was  made. 

§  285.  Maturity  of  bill  payable  after  sight;  accepted  for 
honor.  Where  a  bill  payable  after  sight  is  accepted  for  honor, 
its  maturity  is  calculated  from  the  date  of  the  noting  for  non- 
acceptance  and  not  from  the  date  of  the  acceptance  for  honor. 

§  286.  Protest  of  bill  accepted  for  honor  or  containing  a 
reference  in  case  of  need.  Where  a  dishonored  bill  has  been 
accepted  for  honor  supra  protest  or  contains  a  reference  in 
case  of  need,  it  must  be  protested  for  non-payment  before  it 
is  presented  for  payment  to  the  acceptor  for  honor  or  referee 
in  case  of  need. 


ACCEPTANCE   FOR    HONOR  335 

§  287.  Presentment  for  payment  to  acceptor  for  honor; 
how  made.  Presentment  for  pa3mient  to  the  acceptor  for 
honor  must  be  made  as  follows: 

1.  If  it  is  to  be  presented  in  the  place  where  the  protest 
for  non-payment  was  made,  it  must  be  presented  not  later 
than  the  day  following  its  maturity; 

2.  If  it  is  to  be  presented  in  some  other  place  than  the  place 
where  it  was  protested,  then  it  must  be  forwarded  within  the 
time  specified  in  section  one  hundred  and  seventy-five. 

§  288.  When  delay  in  making  presentment  is  excused. 

The  provisions  of  section  one  hundred  and  forty-one  apply 
where  there  is  delay  in  making  presentment  to  the  acceptor 
for  honor  or  referee  in  case  of  need. 

§  289.  Dishonor  of  bill  by  acceptor  for  honor.  When  the 
bill  is  dishonored  by  the  acceptor  for  honor  it  must  be  pro- 
tested for  non-payment  by  him. 


336  NEGOTIABLE   INSTRUMENTS    LAW 

ARTICLE  1 6 
Pa3mient  for  Honor 
Section  300.  Who  may  make  payment  for  honor. 

301.  Payment  for  honor;  how  made. 

302.  Declaration  before  payment  for  honor. 

303.  Preference  of  parties  offering  to  pay  for  honor. 

304.  Effect  on  subsequent  parties  where  bill  is  paid 

for  honor. 

305.  Where  holder  refuses  to  receive  payment  supra 

protest. 

306.  Rights  of  payer  for  honor. 

§  300.  Who  may  make  payment  for  honor.  Where  a  bill 
has  been  protested  for  non-payment,  any  person  may  inter- 
vene and  pay  it  supra  protest  for  the  honor  of  any  person 
liable  thereon  or  for  the  honor  of  the  person  for  whose  account 
it  was  drawn. 

3  R.  C.  L.  1332;  92  Am.  Dec.  570,  579. 
See  Dan.  Neg.  Inst.,  Section  1254. 

Contrary  to  the  general  mle  as  to  voluntary  payments  by  a  stranger 
without  request  of  the  debtor,  a  stranger  may  pay  a  negotiable  bill  of 
exchange  for  the  honor  of  any  one  of  the  parties,  and  become  thereby 
subrogated  to  the  rights  of  the  holder  to  the  extent  that  he  may  recover 
against  the  person  for  whose  honor  he  pays,  and  all  parties  prior  thereto. 
He  is  also  subrogated  to  the  rights  and  remedies  of  the  party  for  whose 
honor  he  pays,  but  this  right  of  payment  supra  protest  is  not  extended  to 
promissory  notes. 

§  301.  Payment  for  honor;  how  made.  The  payment 
for  honor  supra  protest  in  order  to  operate  as  such  and  not  as  a 


PAYMENT    FOK    HONOR  337 

mere  voluntary  payment,  must  be  attested  by  a  notarial  act 
of  honor,  which  may  be  appended  to  the  protest  or  form  an 
extension  to  it. 

The  method  of  accepting  for  honor  is  as  follows:  The  acceptor  for 
honor  personally  appears  before  a  notary  public  with  witnesses,  and 
declares  that  he  accepts  such  protested  bill  in  honor  of  the  drawer  or 
indorser,  as  the  case  may  be,  and  that  he  will  satisfy  it  at  the  time  ap- 
pointed. He  then  subscribes  his  name  to  the  words  following:  "Ac- 
cepted supra  protest  in  honor  of  A.  B.,"  or,  more  usually,  "Accepts  S.  P." 
An  acceptance  for  honor  supra  protest  must  be  in  writing,  and  indicate 
that  it  is  an  acceptance  for  honor,  and  must  be  signed  by  the  acceptor 
for  honor.  An  agreement  on  the  part  of  a  stranger  to  the  bill  to  pay  it  at 
maturity  if  the  drawee  does  not  is  an  acceptance  for  honor  or  an  acceptance 
supra  protest.  There  can  be  an  acceptance  for  honor  only  when  the 
bill  has  been  protested;  and  it  is  at  the  election  of  the  holder  to  take  or 
refuse  an  acceptance  for  honor.  The  acceptance  may  be  for  part  only 
of  the  sum  for  which  the  bill  is  drawn.  It  is  well  settled  that  a  stranger 
or  one  not  a  party  to  the  bill  may  accept  for  honor;  and  the  drawee  himself 
may  accept  for  the  honor  of  the  drawer  or  of  an  indorser.  And  different 
persons  may  be  acceptors  supra  protest  for  the  honor  of  different  parties 
to  the  bill.  The  party  for  whose  honor  the  bill  is  accepted  should  be 
designated ;  and  the  acceptor  supra  protest  must  at  once  give  notice  of  his 
acceptance  to  the  person  for  whose  honor  it  is  made. 

3  R.  C.  L.  1331;  7  L.  R.  A.  209;  Swope  v.  Ross,  40  Pa.  St.  186;  80 
Am.  Dec.  567;  92  Am.  Dec.  579  and  Note. 

§  302.   Declaration    before    payment    for    honor.     The 

notarial  act  of  honor  must  be  founded  on  a  declaration  made 
by  the  payer  for  honor  or  by  his  agent  in  that  behalf  declaring 
his  intention  to  pay  the  bill  for  honor  and  for  whose  honor  he 
pays. 

§  303.  Preference  of  parties  offering  to  pay  for  honor. 

Where  two  or  more  persons  offer  to  pay  a  bill  for  the  honor  of 
different  parties,  the  person  whose  payment  will  discharge 
most  parties  to  the  bill  is  to  be  given  the  preference. 

§  304.  Effect  on  subsequent  parties  where  bill  is  paid 
for^^honor.  Where  a  bill  has  been  paid  for  honor  all  parties 
subsequent  to  the  party  for  whose  honor  it  is  paid  are  dis- 


338  NEGOTIABLE   INSTRUMENTS   LAW 

charged,  but  the  payer  for  honor  is  subrogated  for,  and 
succeeds  to,  both  the  rights  and  duties  of  the  holder  as  regards 
the  party  for  whose  honor  he  pays  and  all  parties  liable  to  the 
latter. 

§  305.  Where  holder  refuses  to  receive  payment  supra 
protest.  Where  the  holder  of  a  bill  refuses  to  receive  payment 
supra  protest,  he  loses  his  right  of  recourse  against  any  party 
who  would  have  been  discharged  by  such  payment. 

§  306.  Rights  of  payer  for  honor.  The  payer  for  honor 
on  paying  to  the  holder  the  amount  of  the  bill  and  the  notarial 
expenses  incidental  to  its  dishonor,  is  entitled  to  receive  both 
the  bill  itself  and  the  protest. 

A  stranger  who  pays  supra  protest  for  the  honor  of  the  bill  generally 
is  to  be  considered  as  an  indorsee  paying  full  value,  and  he  is  entitled  to 
recover  against  all  the  parties  to  the  bill.  If  payment  has  been  made 
for  the  honor  of  a  particiilar  indorser,  the  payer  may  sue  him  and  all 
prior  parties,  but  not  subsequent  indorsers,  the  latter  being  discharged  by 
such  payment.  But,  if  a  person  takes  up  a  bill  for  the  honor  of  the 
drawer,  he  has  no  right  of  action  against  the  acceptor,  if  he  accepted  it 
for  the  accommodation  of  the  drawer,  the  reason  given  being  that  if  the 
drawer  had  taken  it  up  himself,  no  action  would  lie  upon  it,  and  a  third 
person  taking  it  up  for  him  must  occupy  the  same  position.  Where  a 
bill  has  been  paid  for  honor,  all  parties  subsequent  to  the  party  for  whose 
honor  it  is  paid  are  discharged,  but  the  payer  for  honor  is  subrogated  for, 
and  succeeds  to,  both  the  rights  and  duties  of  the  holder  as  regards  the 
party  for  whose  honor  he  pays  and  all  parties  liable  to  the  latter. 

3  R.  C.  L.  1333;  McDowell  v.  Cook,  45  Am.  Dec.  289;  Smith  v. 
Sawyer,  92  Am.  Dec.  (Me.)  576. 


BILLS   IN    SETS  339 

ARTICLE  17 
Bills  in  Sets 

Section  310.  Bill  in  sets  constitutes  one  bill. 

311.  Rights    of    holders    where    different    parts    are 

negotiated. 

312.  Liability  of  holder  who  indorses  two  or  more 

parts  of  a  set  to  different  persons. 

313.  Acceptance  of  bills  drawn  in  sets. 

314.  Payment  by  acceptor  of  bills  drawn  in  sets. 

315.  Effect  of  discharging  one  of  a  set. 

§  310.  Bill  in  sets  constitutes  one  bill.  Where  a  bill  is 
drawn  in  a  set,  each  part  of  the  set  being  numbered  and  con- 
taining a  reference  to  the  other  parts,  the  whole  of  the  parts 
constitutes  one  bill. 

Where  the  holder  declares  upon  one  of  a  set  of  exchange,  it  is  not 
necessary  to  account  for  the  non-production  of  the  rest;  any  ground  of 
defense  which  may  arise  in  reference  to  another  of  the  set,  it  devolves 
on  the  defendant  to  make. 

Hazzard  v.  Shelton,  15  Ala.  62. 

In  Downes  &  Co.  v.  Church,  13  Pet.  (U.  S.),  205  (10  L.  Ed.  127), 
it  was  decided,  that  where  the  holder  of  one  of  a  set  of  exchange,  which 
has  been  protested,  and  due  notice  thereof  given  to  the  indorser,  brings 
an  action  thereon  or  against  the  drawer,  and  upon  the  trial  produces  the 
bill  to  which  the  protest  is  attached,  it  is  not  incumbent  upon  him  to 
produce  or  account  for  the  non-production  of  the  other  parts  of  the  set. 
The  law  will  not  presume  that  the  other  bills  of  the  set  have  been  nego- 
tiated to  other  persons,  merely  because  they  are  not  produced.  Nor  can 
the  drawer  be  prejudiced  by  their  non-production;  for  if  he  pays  the  bill 
without  notice  of  any  superior  adverse  claim,  under  the  negotiation  of 
another  of  the  set  to  a  third  person,  he  will  be  discharged  from  liability. 

See  also,  Caras  v.  Thalmann,  138  App.  Div.  297. 


340  NEGOTIABLE    INSTRUMENTS    LAW 

§  311.  Rights  of  holders  where  different  parts  are 
negotiated.  Where  two  or  more  parts  of  a  set  are  negotiated 
to  different  holders  in  due  course,  the  holder  whose  title  first 
accrues  is  as  between  such  holders  the  true  owner  of  the  bill. 
But  nothing  in  this  section  affects  the  rights  of  a  person  who 
in  due  course  accepts  or  pays  the  part  first  presented  to  him. 

§  312.  Liability  of  holder  who  indorses  two  or  more 
parts  of  a  set  to  different  persons.  Where  the  holder  of  a 
set  indorses  two  or  more  parts  to  different  persons  he  is  liable 
on  every  such  part,  and  every  indorser  subsequent  to  him 
is  liable  on  the  part  he  has  himself  indorsed,  as  if  such  parts 
were  separate  bills. 

§  313.  Acceptance  of  bills  drawn  in  sets.  The  accept- 
ance may  be  written  on  any  part  and  it  must  be  written  on  one 
part  only.  If  the  drawee  accepts  more  than  one  part,  and 
such  accepted  parts  are  negotiated  to  different  holders  in  due 
course,  he  is  liable  on  every  such  part  as  if  it  were  a  separate 
bill. 

§  314.  Payment  by  acceptor  of  bills  drawn  in  sets. 
When  the  acceptor  of  a  bill  drawn  in  a  set  pays  it  without 
requiring  the  part  bearing  his  acceptance  to  be  delivered  up 
to  him,  and  that  part  at  maturity  is  outstanding  in  the  hands 
of  a  holder  in  due  course,  he  is  Hable  to  the  holder  thereon. 

§  315.  Effect  of  discharging  one  of  a  set.  Except  as 
herein  otherwise  provided,  where  any  one  part  of  a  bill  drawn 
in  a  set  is  discharged  by  payment  or  otherwise  the  whole  bill 
is  discharged. 

Variant. — The  Wisconsin  statute  adds  two  new  sections,  entitled 
"Damages  on  Bills,"  as  follows: 

"Sec.  1682.  Whenever  any  bill  of  exchange  drawn  or  indorsed 
wathin  this  state  and  payable  without  the  limits  of  the  United  States, 
shall  be  duly  protested  for  non-acceptance  or  non-payment,  the  party 
liable  for  the  contents  of  such  bill  shall,  on  due  notice  and  demand  thereof, 
pay  the  same  as  the  current  rate  of  exchange  at  the  time  of  the  demand 
and  damages  at  the  rate  of  five  per  cent,  upon  the  contents  thereof,  to- 
gether with  interest  on  the  said  contents  to  be  computed  from  the  date 


BILLS   IN   SETS  341 

of  the  protest;  and  said  amount  of  contents,  damages  and  interest  shall 
be  in  full  of  all  damages,  charges  and  expenses." 

*'Sec.  1683.  If  any  bill  of  exchange  drawn  upon  any  person  or 
corporation  out  of  this  state,  but  within  some  state  or  territory  of  the 
United  States,  for  the  payment  of  money  shall  be  duly  presented  for 
acceptance  or  payment  and  protested  for  non-acceptance  or  non-payment, 
the  drawer  or  endorser  thereof,  due  notice  being  given  of  such  non- 
acceptance  or  non-payment,  shall  pay  said  bill  with  legal  interest,  accord- 
ing to  its  tenor  and  five  per  cent,  damages,  together  with  costs  and 
charges  of  protest." 


Two  parts  of  a  bill  of  exchange  drawn  in  a  set  in  New  York  on  a 
drawee  in  Paris  were  mailed  in  separate  covers  to  the  payees  in  Spain. 
Only  the  second  part  of  the  bill  was  received.  This  was  indorsed  by  the 
payees,  negotiated  and  presented  to  the  drawee  and  payment  refused, 
because  the  first  part,  which  was  apparently  regularly  indorsed  by  the 
payees  and  several  other  persons,  had  been  previously  presented  and 
paid  in  good  faith.  One  notice  of  dishonor  was  given  to  the  drawer,  and 
the  indorsee  of  the  payees  sued  the  drawer.  The  French  Code  of  Com- 
merce provided  that  "The  party  who  pays  a  bill  of  exchange  at  its  maturity 
and  without  opposition  is  presumably  discharged."  Held,  that  as  the 
validity  of  the  payment  was  governed  by  the  law  of  the  place  of  per- 
formance, and  as  by  the  French  Code  the  payment  of  the  first  part  of 
the  bill  was  valid,  although  the  endorsements  were  forged,  and  the  drawer 
was  therefore  discharged,  a  complaint  which  set  forth  the  above  facts  was 
demurrable. 

Caras  v.  Thalmann,  138  App.  Div.  (N.  Y.)  297. 

Where  the  plaintifiE  in  the  City  of  New  York  purchased  a  draft  in  a 
set  of  two,  drawn  on  a  bank  in  Vienna,  and  the  first  of  the  set,  which  has 
been  mailed  to  the  payee,  was  paid  by  the  drawee  in  good  faith  on  a 
forged  indorsement,  the  obligation  on  the  duplicate  draft  was  discharged, 
and  the  purchaser  cannot  recover  of  the  drawer. 

Casper  v.  Kiihne,  159  App.  Div.  (N.  Y.)  389;  Kessler  v.  Armstrong 
Co.,  158  Fed.  Rep.  745;  Sexton  v.  Armstrong,  207  U.  S.  597. 


342  NEGOTIABLE    INSTRUMENTS    LAW 

ARTICLE  1 8 
Promissory  Notes  and  Checks 

Section  320.  Promissory  note  defined. 

321.  Check  defined. 

322.  Within  what  time  a  check  must  be  presented. 

323.  Certification  of  check;  effect  of. 

324.  Effect  where  holder  of  check  procures  it  to  be 

certified. 

325.  When  check  operates  as  an  assignment. 

326.  Recovery  of  forged  check. 

§  320.  Promissory  note  defined.  A  negotiable  promis- 
sory note  within  the  meaning  of  this  chapter  is  an  uncondi- 
tional promise  in  writing  made  by  one  person  to  another, 
signed  by  the  maker  engaging  to  pay  on  demand  or  at  a  fixed 
or  determinable  future  time,  a  sum  certain  in  money  to  order 
or  to  bearer.  Where  a  note  is  drawn  to  the  maker's  own 
order,  it  is  not  complete  until  indorsed  by  him. 

All  bills,  notes  or  other  instruments  which  shall  be  issued  by  any 
bank  or  individual  banker  purporting  to  be  receivable  in  payment  of  debts 
to  it,  shall  be  deemed  and  taken  to  be  promissory  notes  for  the  payment 
on  demand  of  the  sum  or  value  expressed  in  such  instrument,  and  such 
simi  shall  be  recoverable  by  the  holder  or  bearer  of  such  instrtmient,  in 
like  manner  as  if  the  same  were  a  promissory  note. 

Section  HI,  New  York  State  Banking  Law. 

A  note  may  be  made  payable  to  "A  or  bearer,"  "A  or  order,"  or  to 
"A"  only. 

President  v.  Htirtin,  9  Johns  217;  Kimball  v.  Himtington,  10  Wend. 
675. 

But  if  payable  to  "A"  only,  it  is  not  negotiable,  not  being  payable 
to  bearer  or  to  order. 

Owens  V.  Blackburn,  161  App.  Div.  (N.  Y.)  827. 

Neither  the  acknowledgement  of  value  received  or  negotiable  words 
are  essential  to  bring  it  within  the  statute. 


PKOMISSOKY    NOTES   AND    CHECKS  343 

Carver  v.  Hayes,  47  Me.  257;  Franklin  v.  Marsh,  6  N.  H.  364;  Hickok 
V.  Bunting,  92  App.  Div.  (N.  Y.)  167;  Hegeman  v.  Moon,  131  N.  Y.  462. 

A  promissory  note  must  contain  the  positive  engagement  of  the 
maker  to  pay  a  fixed  sum  at  a  certain  definite  time  and  the  agreement 
must  not  depend  on  any  contingency,  but  be  absolute  and  at  all  events. 

Camwright  v.  Gray,  127  N.  Y.  99;  Merchants  National  Bank  v. 
Sugar  Co.,  162  App.  Div.  248. 

An  instrument  by  which  the  person  signing  it  promises  uncondition- 
ally to  pay  another  certain  sum  of  money  at  a  certain  specified  time,  is 
negotiable,  although  coupled  with  an  acknowledgement  of  the  receipt 
of  a  policy  of  insiu-ance. 

Equitable  Trust  Co.  v.  Newman,  69  Misc.  494;  Equitable  Trust  Co.  v. 
Taylor,  146  App.  Div.  424. 

An  instnmient  which  contains  an  order  or  promise  to  do  any  act  in 
addition  to  the  payment  of  money  is  not  negotiable. 
Hibemia  Bank  v.  Dresser,  132  La.  532. 

A  complaint  in  an  action  on  a  promissory  note  payable  to  the  order 
of  the  maker,  which  does  not  allege  his  indorsement  of  it,  is  demurrable. 

Edelman  v.  Rams,  58  Misc.  561 ;  Odell  v.  Clyde,  23  Misc.  734;  Simon  v. 
Mintz,  51  Misc.  671. 

An  allegation  in  a  complaint  in  an  action  on  a  note  that  the  instrument 
was  delivered  for  a  "valuable  consideration"  is  a  statement  of  fact  and 
not  a  conclusion  of  law,  and  the  complaint  is  not  demurrable  for  failure 
to  state  facts  constituting  a  cause  of  action. 

St.  Lawrence  Bank  v.  Watkins,  153  App.  Div.  (N.  Y.)  551. 

A  person  who  places  his  name  on  the  back  of  a  promissory  note  made 
by  the  maker,  to  the  order  of  himself,  before  indorsement  by  the  maker, 
cannot  escape  liability  as  an  indorser  under  this  section. 

Yonkers  National  Bank  v.  Mitchell,  156  App.  Div.  318. 

In  an  action  on  a  note  payable  absolutely,  evidence  is  not  admissible 
to  prove  an  oral  agreement  that  the  maker  of  the  note  was  not  to  pay  it 
imless  he  received  the  amount  of  the  note  from  another  person. 

Torpey  v.  Tebo,  184  Mass.  307;  Tacoma  Mill  v.  Sherwood,  39  Pac. 
977;  Woods  v.  Finley,  153  N.  C.  498; 

Nor  is  parol  evidence  admissible  to  show  that  it  was  agreed  that  the 
maker  should  pay  in  small  amounts. 

Cauley  v.  Dunn,  167  N.  C.  32. 

Where  a  note  is  ambiguous  on  its  face,  extraneous  evidence,  either 
written  or  oral,  is  admissible,  to  explain  it. 

Dunbar  Box  Co.  v.  Martin,  53  Misc.  312. 


344  NEGOTIABLE   INSTRUMENTS   LAW 

Promissory  Note. 


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A  promissory  note  differs  from  a  mere  acknowledgement  of  debt 
without  any  promise  to  pay,  as  when  the  debtor  gives  his  creditor  an 
I  O  U.  In  its  form  it  usually  contains  a  promise  to  pay,  at  a  time  therein 
expressed,  a  siim  of  money  to  a  person  therein  named,  or  to  his  order,  for 
value  received.     It  is  dated  and  signed  by  the  maker. 

A  note  by  two  or  more  makers  may  be  either  joint  or  joint  and  several. 
A  note  signed  by  more  than  one  person,  and  beginning,  "We  promise," 
etc.,  is  a  joint  note  only.  A  joint  and  several  note  usually  expresses  that 
the  rhakers  jointly  and  severally  promise.  But  a  note  signed  by  more 
than  one  person,  and  beginning,  "I  promise,"  etc.,  is  several  as  well  as 
joint.  So,  a  note  beginning,  "I  promise,"  and  signed  by  one  partner  for 
his  co-partners,  is  a  joint  note  of  all.  A  note  in  the  form  "I  promise,"  etc., 
subscribed  by  two  persons,  is  a  joint  and  several  note.  Persons  who  sign 
their  names  to  a  note  will  be  presimied  to  be  joint  makers  in  the  absence 
of  anything  to  the  contrary  on  the  face  of  the  note. 

Although  a  promissory  note,  in  its  original  shape,  bears  no  resemblance 
to  a  bill  of  exchange,  yet  when  indorsed  it  is  exactly  similar  to  one;  for 
then  it  is  an  order  by  the  indorser  of  the  note  upon  the  maker  to  pay 
the  indorsee.  The  indorser  is,  as  it  were,  the  drawer;  the  maker,  the 
acceptor;  and  the  indorsee,  the  payee.  Most  of  the  rules  applicable  to 
bills  of  exchange  equally  affect  promissory  notes. 

There  are  two  principal  qualities  essential  to  the  validity  of  a  note: 
1.  That  it  be  payable  at  all  events,  and  not  dependent  on  any  contin- 
gency.    2.  It  is  required  that  it  be  for  the  payment  of  money  only. 

The  original  parties  to  a  promissory  note  are  the  maker  or  drawer  and 
payee.  The  essential  parts  to  a  note  are:  Daie^  which  is  usually  that  of 
its  delivery,  but  may  be  date  ahead  or  back  of  delivery.  Where  no  date 
is  mentioned  it  will  be  presumed  to  be  that  of  its  delivery.  Time,  the 
time  of  payment  may  be  expressed  in  days,  months,  years,  demand  or 
some  other  fixed  determinable  time;  where  no  time  is  stated  it  is  payable 


PROMISSORY    NOTES    AND    CHECKS  345 

on  demand.  Promise,  which  must  be  absolute  and  not  conditional  or 
contingent.  Payee,  the  person,  firm  or  corporation  to  whom  the  promise 
is  made,  which  payee  must  be  expressed  with  certainty  and  be  capable 
of  being  identified.  Amount,  which  must  be  stated  with  certainty  and 
be  in  money,  not  securities  or  property.  Place,  which  may  be  anywhere 
designated  by  the  maker.  If  payable  at  a  designated  bank  without 
the  address  indicated,  it  will  be  presimied  to  be  payable  at  that  bank 
in  the  city  or  town  where  the  note  was  executed.  Where  no  place  of 
payment  is  stated  it  is  payable  at  the  place  of  business  or  residence  of  the 
maker.  Value  received,  or  similar  words  are  not  necessary,  the  law 
assuming  it  being  issued  for  value.  Interest,  where  not  specified  does 
not  bear  interest  until  after  maturity.  Signature,  which  is  that  of  the 
maker  or  his  or  its  authorized  agent. 

A  promissory  note  bearing  date  of  a  secular  day,  but  in  fact  made  and 
delivered  on  Sunday,  is  invalid  as  between  the  parties. 

Cook  V.  Forker,  193  Pa.  461;  Crawson  v.  Gross,  107  Mass.  439; 
Froemert  v.  Decker,  51  Wis.  46;  Header  v.  White,  66  Me.  90;  22  Am. 
Rep.  551;  Textbook  Co.  v.  Ohl,  150  Mich.  131;  13  L.  R.  A.  1157;  Parker  v. 
Pitts,  73  Ind.  597;  38  Am.  Rep.  155;  Braford  v.  Chandler,  81  Vt.  270; 
17  L.  R.  A.  1239;  Green  v.  Tulane,  52  N.  J.  L.  169;  28  Atl.  9. 

The  following  clauses  may  be  added: 

(1)  "With  interest  at  the  rate  of per  cent,  per  annum  until 

paid." 

(2)  "With   interest   at   the   rate   of per  cent,   per   annum, 

payable in  advance." 

(3)  "Should  the  interest  not  be  paid  as  agreed,  then  the  whole  sum 
of  principal  and  interest  shall  immediately  become  due  and  payable,  and 

interest  shall  be  compounded  monthly  thereafter  at  the  rate  of per 

cent,  per  annum." 

(4)  "Said  interest,  if  not  paid  as  it  becomes  due,  is  to  be  added  to  the 
principal,  and  become  part  thereof,  and  to  bear  interest  at  the  same  rate." 

(5)  "With per  cent,   attorney's  fees  in  case  the  holder  is 

obliged  to  place  this  note  in  the  hands  of  an  attorney  at  law  for  collection." 

(6)  "Waiving  grace." 

(7)  "Waiving  grace  and  protest." 

(8)  "Waiving  all  benefit  of  stay  and  exemption  laws." 

(9)  "The  maker  and  endorser  of  this  note  hereby  expressly  waive  all 
right  to  claim  exemption  allowed  by  the  constitution  and  laws  of  this  or 
any  other  state." 

(10)  "The  maker,  signer  and  endorser  of  this  note  severally  waive 
demand,  notice  and  protest,  and  agree  to  all  extensions  and  partial  pay- 
ments, before  or  after  maturity,  without  prejudice  to  the  holder." 


346  NEGOTIABLE   INSTRUMENTS   LAW 

(11)  "No  extension  of  the  time  of  payment  with  or  without  our 
knowledge,  by  receipt  of  interest  or  otherwise,  shall  release  us  or  either 
of  us,  from  the  obligations  of  payment." 

(12)  (In  Louisiana)  "The  endorsers  and  sureties  waiving  the  pleas  of 
discussion  and  division." 

(13)  (In  states  where  the  ability  of  married  women  to  contract  is 
limited)  "I  sign  this  note  intending  hereby  to  charge  my  separate  estate 
with  the  payment  of  same." 

PROMISSORY  NOTE  WITH  DEPOSIT  OF  COLLATERAL. 

{Long  Form) 

% 

191 

after  date,  for  Value  Received 

PROMISE  to  pay  to  the  order  of  THE BANK  OF 

at  its  banking  house  in  the  City  of 

DOLLARS, 

with  interest  at  the  rate  of per  cent,  per  annum  (1)  having  deposited  with  and  pledged  to 

said  Bank,  as  collateral  security  for  the  payment  of  this  note  and  also  for  all  other  present  or  future  lia- 
biUties  and  demands  of  any  kind  of  the  holder  hereof,  against  the  undersigned,  now  existing  or  hereafter 
contracted,  whether  created  directly  or  acquired  by  assignment,  whether  absolute  or  contingent,  whether 
due  or  to  become  due,  upon  the  stipulations  and  powers  herein  contained,  the  following  property,  viz.: 

the  market  value  of  which  is  now  $ The  undersigned  hereby  give  the  Bank 

a  lien  for  all  of  said  liabiUties  and  demands,  including  this  note,  upon  all  property  of  the  undersigned, 
left  in  the  possession  or  custody  of  said  Bank  for  safe  keeping  or  other  purpose,  or  coming  to  said  Bank 
in  any  way  (all  remittances  and  property  to  be  deemed  in  its  possession  or  custody  as  soon  as  put  in 
transit  to  said  Bank  by  mail  or  carrier) ,  and  upon  any  money  or  moneys  and  balance  of  deposit  or  deposits 
with  said  Bank,  hereby  authorizing  and  empowering  said  Bank  at  any  time  to  apply  said  moneys  and 
the  deposit  account  or  accounts  of  the  undersigned  on  the  books  of  the  said  Bank,  in  whole  or  in  part, 
to  the  payment  of  any  or  all  of  said  demands;  and  do  hereby  authorize  and  empower  said  Bank,  upon 
or  after  the  non-payment  of  this  note,  or  of  any  of  said  other  liabilities  and  demands  when  due,  or  in 
case  of  failure  to  comply  with  any  demands  hereunder,  or  to  furnish  further  security  or  make  payment 
on  account  as  hereinafter  agreed,  to  sell,  assign,  transfer  and  deliver  the  whole  or  any  part  of  said  collateral 
security  or  any  substitutes  therefor  or  additions  thereto,  or  other  property  upon  which  said  Bank  is  hereby 
given  a  lien,  at  any  Broker's  Board  or  at  public  or  private  sale  at  the  option  of  said  Bank,  or  any  of  its 
officers,  or  agents,  without  advertisement,  or  notice  of  intention  to  sell,  or  of  the  time  or  place  of  sale,  and 
without  demand  of  payment  of  this  note  or  of  any  of  said  other  liabilities  and  demands  (such  advertise- 
ment, notice  and  demand  being  hereby  expressly  waived),  and  after  deducting  all  costs  and  expenses, 
including  counsel  fees,  arising  from  or  incidental  to  the  sale,  realization  or  collection  of  any  of  said  collat- 
eral security,  substitutions  or  additions  or  of  any  of  said  UabiHties  and  demands,  including  this  note,  to 
apply  the  residue  of  the  proceeds  to  pay  any  or  all  of  said  liabilities  and  demands  in  whole  or  in  part, 
due  or  not  due.  including  this  note,  making  a  rebate  of  interest  upon  demands  not  matured  by  their 
terms,  returning  the  surplus,  if  any,  to  the  undersigned;  and  do  hereby  agree  that  at  any  such  sale  the 
said  Bank  may  become  the  purchaser  of  any  or  all  of  said  collateral  security,  substitutions,  additions  or 
other  property  upon  which  said  Bank  is  hereby  given  a  lien,  and  may  hold  the  same  thereafter  in  its  own 
right  absolutely,  free  from  any  claim  and  any  right  of  redemption  of  the  undersigned;  and  that  in  case  of 
deficiency  the  undersigned  will  pay  to  the  said  Bank  the  amount  thereof  forthwith;  and  do  hereby  agree 
that  if  said  Bank,  or  any  of  its  officers  or  agents,  shall  at  any  time  be  of  opinion  that  said  property  is  of 
less  value  than  above  stated,  or  that  the  whole  or  any  part  of  the  property  above  or  hereafter  specifically 
pledged  or  on  which  the  said  Bank  is  hereby  given  a  lien,  has  declined  or  may  decline  in  value,  so  that 

the  market  value  shall  not  be  at  least per  cent,  more  than  the  amount  unpaid  of  this 

note  and  all  other  liabilities  of  the  undersigned  to  said  Bank,  or  if  the  same  shall,  at  any  time,  for  any 
other  reason  become  unsatisfactory  to  said  Bank,  then  said  Bank  may  in  its  discretion,  call  for  payment 
on  account  or  additional  security  satisfactory  to  the  holder  of  said  note,  and  the  undersigned  will  immed- 
iately make  such  payment  on  account,  or  furnish  such  additional  security,  and  that  in  case  of  failure  so 
to  do  before  twelve  o'clock  noon  of  the  next  day  after  the  day  of  such  call,  th'.s  note  and  all  other  liabilities 
of  the  undersigned  to  the  said  Bank,  without  notice  or  demand,  shall  at  the  option  of  said  Bank,  be  and 
become  forthwith  due  and  payable,  and  said  Bank  may  immediately  reimburse  itself  by  a  sale  of  said 
securities  as  hereinbefore  provided.  Such  call  for  payment  or  additional  security  may  be  made  by  giving 
any  of  the  undersigned  oral  or  written  notice  thereof,  or  by  leaving  written  notice  thereof  at  any  office 
or  place  of  business  or  usual  abode  of  any  of  the  undersigned.  In  case  of  any  exchange  of,  or  substitutions 
for,  or  addition  to  said  property,  or  any  part  thereof,  the  provisions  of  this  agreement  shall  extend  to 
such  new,  exchanged,  substituted  or  additional  property;  and  do  hereby  agree  that  said  Bank  may  transfer 
this  note  and  that  upon  such  transfer  said  Bank  may  deliver  all  security  held  therefor,  or  any  part  thereof, 
to  the  transferee  who  shall  thereupon  become  vested  with  all  the  powers  and  rights  herein  given  to  said 
Bank  in  respect  thereto,  and  the  said  Bank  shall  thereafter  be  forever  relieved  and  fully  discharged  from 
any  liability  or  responsibility  in  the  matter. 


PROMISSORY   NOTES   AND   CHECKS  347 

It  is  further  agreed  that  if  the  undersigned  shall  become  insolvent,  or  make  a  general  assignment 
for  the  benefit  of  creditors,  or  if  a  petition  in  bankruptcy  shall  be  filed  by  or  against  the  undersigned,  or  a 
receiver  shall  be  appointed  of  his  property  or  assets,  then  this  note  and  all  other  liatsilities  of  the  under- 
signed to  said  Bank  shall  thereupon  become  due  and  payable  forthwith.  The  undersigned  hereby  ex- 
pressly empowers  said  Bank,  at  its  option,  to  subscribe  for,  take  and  hold,  as  additional  collateral  for 
any  and  all  of  the  indebtedness  above  named,  all  stock  increases  and  stock  and  other  special  dividends 
which  may  be  made  upon  collaterals  held  hereunder. 

It  is  further  agreed  that  no  delay  on  the  part  of  the  holder  hereof,  in  exercising  any  rights  here- 
under, shall  operate  as  a  waiver  of  said  rights. 


PROMISSORY  NOTE  WITH  DEPOSIT  OF  COLLATERAL 

(Short  Form) 

I9- 

$ 

after  date  for   Value  Received, 

promise  to  pay  to  The 

Bank  of ,  or  order,  at  its  office 

Dollars, 

in  United  States  gold  coin,  or  its  equivalent,  with  interest  from  date  hereof; 
having  deposited  with  it  as  collateral  security  for  payment  of  this  or  any  other 
liability  or  liabilities  of  ours  to  it,  due  or  to  become  due,  or  that  may  be  here- 
after contracted,  the  following  property,  viz.: 


the  market  value  of  which  is  now  ,  with  this  condition, 

viz.,  that  the  Bank  of has  the  right  to  call 

for  additional  security  should  the  said  collateral  decline  in  value,  and  on 
failure  to  respond  to  such  call,  or  on  the  non-performance  of  this  promise, 
or  on  the  non-payment  of  the  liabilities  above  mentioned,  the  said  Bank,  its 
President  or  Cashier,  is  hereby  given  full  power  and  authority  to  sell  and 
assign  and  deliver  the  whole  or  any  part  of  the  above-named  securities,  or  any 
substitute  therefor,  or  any  addition  thereto  at  any  Brokers'  Board,  or  at  any 

public  or  private  sale,  at  the  option  of  the  said Bank  of 

or  its  President  or  Cashier,  or  their  assigns,  at  any  time  or  times  hereafter, 
without  advertisement  or  notice — such  advertisement  or  notice  being  hereby 

expressly  waived;  and  upon  su  h   sale    the    said   Bank    of 

,  the  holder  hereof  may  purchase  the  whole  or  any  part 

of  such  securities — discharged  from  any  right  of  redemption,  and  after  deducting 
all  legal  or  other  costs  and  expenses  for  collection,  sale  and  delivery,  may 
apply  the  residue  of  the  proceeds  of  such  sale  or  sales  to  pay  any,  either,  or  fall 

of  said  liabilities  as  said  Bank  of  shall 

deem  proper,  returning  the  overplus  to  the  undersigned.  And  the  under- 
signed agrees  to  be  and  remain  liable  to  the  holder  hereof  for  any  deficiency. 


348  NEGOTIABLE   INSTRUMENTS   LAW 

GUARANTY  OF  COLLATERAL  NOTE. 

IN  CONSIDERATION  of  One  Dollar  {$i.oo)  and  other  valuable  con- 
sideration paid  to  the  undersigned,  the  receipt  of  which  is  hereby  acknowl- 
edged, and  of  the  making,  at  the  request  of  the  undersigned,  of  the  loan  evidenced 
by  the  within  note  and  contract,  the  undersigned  hereby  jointly  and  severally 

guar  a  nteeto  the Bank  of , 

its  successors,  endorsees  or  assigns,  the  punctual  payment,  at  maturity,  of  the 
said  note  and  contract  and  of  the  said  loan,  and  hereby  assent  to  all  the  terms 
and  conditions  of  the  said  note  and  contract,  especially  agreeing  that  so  long 
as  the  maker  is  bound  by  the  said  note  and  contract  and  the  conditions  therein 
contained,  that  he  will  remain  bound, — waiving  any  defenses  that  the  maker 
or  makers  could  not  maintain  as  maker. 

The  undersigned  hereby  waives  demand  of  payment,  and  also  waives  the 
protest,  and  notice  of  protest  of  the  within  note. 


NOTE  WITH  TRANSFER  OF  ACCOUNT 

$ (Place)  Date 

On  demand  after  date  we  promise  to  pay  to  the  order  of 

THE  BANK 

of  

DOLLARS 

at  the  office  of  the   BANK    of   ,  value 

received  with  interest. 


Per 

To  secure  the  payment  of  this  note  and  for  value  received  we  hereby  sell, 

transfer  and  assign  to  the  Bank,  our  right,  title  and 

interest  in  the  account  mentioned  herein,  viz:  (a  mechanics'  lien  for  $2,000 
against  property  of  Richard  Roe,  situate  at  No.  7  Broad  Street)  and  we  hereby 

constitute  ourselves  as  the  Agents  for  the  said Bank, 

for  the  purpose  of  collecting  this  account,  and  agree  to  turn  over  to  the  said 

Bank  of  ,  the  proceeds  of  said  account 

as  soon  as  collected. 


In  the  foregoing  note  the  interest  of  the  maker  in  the  mechanics'  lien 
is  assigned  to  the  bank,  while  by  its  terms  the  maker  may  collect  the 
amoimt  thereof,  but  in  doing  so,  he  is  acting  as  agent  for  the  bank. 
Should  he  collect  the  amount  and  appropriate  to  his  own  use,  an  action 
for  larceny  would  lie. 


PEOMISSOKY   NOTES   AND    CHECKS  349 

FORM  FOR  ASSIGNMENT  OF  BOOK  ACCOUNTS  AS  COLL  A  TERAL 

SECURITY 

FOR  VALUE  RECEIVED,  I  hereby  sell,  assign  and  transfer  to  the 
First  National  Bank  each  and  every  of  the  accounts,  claims,  demands  and 
causes  of  action  named  in  the  schedule  hereto  annexed,  said  schedule  designat- 
ing the  debtor's  name,  date  of  accounts  and  amount  of  same. 

I  state  and  represent  that  said  accounts  are  valid  and  subsisting  and 
except  as  may  be  specified  in  said  schedule,  there  are  no  set-ofs  of  counter 
claims  thereto.  I  further  agree  that  in  case  any  of  said  debtors  remit  for 
or  pay  upon  said  accounts  to  me,  that  I  will  receive  the  said  payment  or 
remittance  as  agent  for  said  bank. 

This  assignment  is  made  as  collateral  security  for  all  my  present  indebted- 
ness to  said  bank  and  for  all  future  claims  or  demands  or  indebtedness  which 
it  may  have  or  hold  against  me. 

JOHN  SMITH 
Dated    iqi  ..  .. 

On before  me  personally  appeared  JOHN  SMITH 

to  me  personally  known  to  be  the  same  person  described  in  and  who  executed 
the  foregoing  instrument,  and  he  acknowledged  to  me  that  he  executed  the 

same. 

Notary  Public. 

Sale  of  Collateral  secured  by  note. 


y^//>r^/rf/y^  •-lZ>yy^y:^yfj&^y  x-g^^^^c^dve 


S//^Ay^^<^y  7^.c^^^t.<^z<^- ^/}^^ 


^/'   (^2^^7i  Wy^X^  /^.^t^^z^^ 


Accompanying  this  note  was  an  agreement  in  writing  providing  that 
in  case  of  non-payment  of  the  note  when  due,  Bauer  could  upon  five  days 
notice  surrender  a  life  insurance  policy  left  with  him  by  Toplitz.  Upon 
maturity  of  the  note  Bauer  did  not  exact  strict  performance,  but  without 
consideration  extended  the  time  of  payment.     Later  without  notice  to 


350  NEGOTIABLE   INSTRUMENTS   LAW 

the  maker  Bauer  surrendered  the  pohcy  to  the  insurance  company  and 
applied  the  proceeds  to  the  payment  of  the  note.  This  company  refused 
to  renew  the  policy  and  the  maker  shortly  thereafter  died.  In  an  action 
for  the  difference  between  the  note  and  the  $5,000  policy,  the  court  held, 
that  Bauer  waived  the  right  to  surrender  the  pohcy  without  notice  when 
he  said  he  would  "hold  it  a  few  days."  While  he  could  have  sold  at 
maturity,  but  by  extending  time  he  would  have  to  give  timely  notice. 
To  quote  from  the  decision: 

"In  recent  times  the  right  of  the  parties  to  enter  into  a  contract  pro- 
\nding  for  a  sale  or  disposition,  without  notice,  has  been  recognized,  and 
the  disabiHty  of  the  pledgee  to  become  the  purchaser,  it  is  said,  may  be 
removed  by  express  stipulation  of  the  parties.  The  pledgee  doubtless 
has  the  right  to  exact  strict  performance  of  the  contract  according  to  its 
terms,  and,  upon  default  in  the  payment  of  the  debt  at  the  time  stipulated, 
he  may,  tmder  a  contract  like  this,  dispose  of  the  pledge.  But  if  he  waives 
the  right  to  exact  strict  performance,  and  gives  time  and  indulgence  to 
the  debtor,  he  cannot  recall  this  waiver  at  his  own  option  without  notice 
to  the  pledgor,  to  the  end  that  the  latter  may  have  an  opportunity  of 
protecting  the  pledge.  The  good  faith  which  the  law  exacts  from  a 
person  dealing  with  trust  property  will  not  permit  the  pledgee,  after 
having  once  waived  the  forfeiture  or  the  right  to  dispose  of  the  pledge 
upon  default  of  payment  at  the  prescribed  time,  to  suddenly  stop  short 
and  insist  upon  the  forfeiture  for  the  non-payment  of  the  debt  when  the 
other  party  is  unprepared  to  redeem.  Strict  performance  in  such  cases 
may  be  waived  by  any  agreement,  declaration  or  course  of  conduct  on 
the  part  of  the  pledgee  which  leads  the  owner  to  believe  that  a  forfeiture 
will  not  be  insisted  upon  without  an  opportunity  given  him  to  redeem." 

TopHtz  V.  Bauer,  161  N.  Y.  325;  Insurance  Co.  v.  Eggleston,  96 
U.  S.  577. 

CERTIFICATES  OF  DEPOSIT 


®It^  Jfitlmnitl  IBmtk  af  (£mntxttrte    ^^^^/'^ 


of  Korh'atT. 


f^  iT  -■ 


'^fat^y 


JMya/'Oyj4t'y^ne^>ci^-t  ^- 


WOT  dl-'BJBCT  XO  CHECK 


PROMISSORY   NOTES   AND   CHECKS  351 

When  a  person  wishes  to  place  funds  in  a  bank  upon  which  he  does 
not  expect  to  draw  checks,  he  may  secure  a  certificate  of  deposit  from  the 
bank.  Certificates  of  deposit  are  the  bank's  receipts  for  funds  deposited. 
They  are  negotiable  and  are  often  passed  in  settlement  of  debts.  They 
are  not  subject  to  check.  A  certificate  of  deposit  is  payable  on  demand 
upon  return  of  the  certificate  properly  indorsed.  If  the  money  is  to  remain 
in  the  bank  for  ninety  days  or  more  it  usually  draws  interest,  but  such 
arrangements  must  be  made  at  the  time  of  the  deposit.  Certificates  for 
deposit  made  for  a  definite  period  of  time  are  known  as  time  certificates 
of  deposit. 

A  certificate  of  deposit  contains  the  elements  of  a  promissory  note. 
It  is  a  written  acknowledgement  by  a  bank  of  the  receipt  of  a  sum  of 
money  on  deposit,  which  the  bank  promises  to  pay  to  the  depositor  or 
his  order,  or  to  some  other  person  whereby  the  relation  of  debtor  and 
creditor  between  the  bank  and  the  depositor  is  created.  The  words 
"promise  to  pay"  are  not  essential  because  the  law  impHes  such  a  promise 
when  the  fact  of  deposit  is  established.  While  money  for  which  a  certifi- 
cate of  deposit  is  given  by  a  bank  is,  in  legal  effect,  in  the  nature  of  a  loan, 
yet  it  is  not  a  loan  in  the  ordinary  sense  of  the  term,  but  a  real  deposit. 
No  particular  form  is  necessary  to  constitute  a  certificate  of  deposit.  A 
letter  of  advice  written  by  the  cashier  of  one  bank  to  another  bank, 
stating  that  a  person  therein  named  has  deposited  with  the  former  bank 
a  sum  of  money  therein  stated,  to  the  credit  of  the  latter  bank  for  the  use 
of  another,  has  been  held  to  be  a  certificate  of  deposit.  An  ordinary 
deposit  slip,  however,  signed  by  the  cashier  of  the  bank  in  which  the 
deposit  is  made  is  not  a  certificate  of  deposit. 

3  R.  C.  L.  198;  Leaphart  v.  Bank  of  Columbia,  33  L.  R.  A.  700; 
Armstrong  v.  American  Exch.  Bank  of  Chicago,  133  U.  S.  433;  First 
National  Bank  v.  Clark,  134  N.  Y.  368;  State  v.  Jackson,  120  S.  W. 
(Mo.)  478;  Elliott  v.  Capital  City  Bank,  103  N.  W.  (la.)  275;  Reed  v. 
Marine  Bank,  136  N.  Y.  454;  Zander  v.  N.  Y.  Security  and  Trust  Co., 
178  N.  Y.  208. 

§  321.  Check  defined.  A  check  is  a  bill  of  exchange 
drawn  on  a  bank  payable  on  demand.  Except  as  herein 
otherwise  provided,  the  provisions  of  this  chapter  applicable 
to  a  bill  of  exchange  payable  on  demand  apply  to  a  check. 

Bank  checks  are  not  inland  bills  of  exchange,  but  have  many  of  the 
properties  of  such  commercial  paper.  Each  is  for  a  specific  sum  payable 
in  money.  In  both  cases  there  is  a  drawer,  a  drawee  and  a  payee.  With- 
out acceptance  no  action  can  be  maintained  by  the  holder  upon  either 


352  NEGOTIABLE   INSTRUMENTS   LAW 

against  the  drawee.  The  chief  difference  is  that  a  check  is  always  drawn 
on  a  bank  or  banker.  The  drawer  is  not  discharged  by  the  laches  of  the 
holder  in  presentment  for  payment,  unless  he  can  show  that  he  has  sus- 
tained some  injury  by  the  default.  It  is  not  due  until  payment  is  de- 
manded and  the  statute  of  limitations  runs  only  from  that  time. 

Merchants  Bank  v.  State  Bank,  10  Wall.  604;  Bull  v.  Bank  of  Kasson, 
123  U.S.  110. 

A  check  is  a  mere  order  on  a  bank  to  pay  from  the  depositor's  account 
according  to  the  instructions  therein  contained,  and  may  be  revoked  by 
the  drawer  at  any  time  before  payment  or  certification. 

Mitchell  V.  Security  Bank,  85  Misc.  360. 

It  is  a  commercial  device  intended  to  be  used  as  a  temporary  expedient 
for  actual  money,  and  is  generally  designed  for  immediate  payment  and 
not  for  circulation. 

Kennedy  v.  Jones,  78  S.  E.  (Ga.)  1069. 

Check. 

CiTi2LEr4S  Bank. 


N  Rochester. NY    ic^^^^zi , \9iyL\ 


No., 


Q31o»  PK  ^yS-^r-^ff^^ 


The  original  parties  to  a  check  are  drawer  or  maker,  George  W. 
Cooper;  drawee.  Citizens  Bank;  payee,  Charles  E.  Wilson.  The  drawer. — 
By  signing  his  name  the  drawer  says  in  effect,  I  have  or  will  have  on  the 
date  of  the  check  on  account  with  the  Citizens  Bank  sufficient  to  pay  the 
amount  thereof  upon  demand.  The  drawee  of  a  check  is  always  a  bank 
or  banker.  The  drawee. — The  bank  promises  in  advance  to  pay  it  on 
presentation,  properly  indorsed  it  if  has  sufficient  funds  of  the  drawer. 
The  bank  is  not  required  to  make  a  partial  payment.  The  payee  assumes 
no  financial  obligations,  but  frequently  does  assume  some  obligations 
when  he  sells  or  transfers  it,  by  indorsement.  The  death  of  the  drawer 
of  a  check  revokes  the  right  of  the  drawee  to  pay  the  amoimt.  The 
drawer  may  at  any  time  before  presentment  by  notifying  and  sufficiently 
describing  the  instnmient  stop  payment. 


PROMISSORY   NOTES   AND   CHECKS  353 

The  essential  parts  of  a  check  are,  Date,  which  is  usually  that  of  its 
issuance,  but  may  be  dated  back  or  ahead,  but  is  not  payable  until  on  or 
after  its  date;  Drawee,  which  must  be  a  bank  or  banker;  Payee,  which 
may  consist  of  one  or  more  persons  or  corporations,  or  may  be  payable 
to  bearer;  Amount,  which  must  be  fixed  with  certainty,  and  in  the  United 
States  expressed  in  dollars  and  cents — and  not  qualified  by  the  use  of 
words,  "in  current  funds,"  "in  currency"  or  similar  phrases.  In  case  of 
variance  between  the  amount  in  writing  and  the  figures  the  writing 
governs,  the  custom  of  inserting  the  figtires  are  merely  for  convenience. 
Signature  of  drawer  or  maker,  which  must  conform  to  arrangements  with 
the  bank. 

The  chief  differences  between  checks  and  bills  of  exchange  are:  1st. 
A  check  is  not  due  until  presented,  and,  consequently,  it  can  be  negotiated 
at  any  time  before  presentment,  and  yet  not  subject  the  holder  to  any  of 
the  equities  existing  between  the  previous  parties.  2d.  The  drawer  of  a 
check  is  not  discharged  for  want  of  immediate  presentment  with  due 
dihgence,  while  the  drawer  of  a  bill  of  exchange  is.  The  drawer  of  a  check 
is  only  discharged  by  such  neglect  when  he  sustains  actual  damage  by  it, 
and  then  only  pro  tanto.  3d.  The  death  of  the  drawer  of  a  check  rescinds 
the  authority  of  the  banker  to  pay  it ;  while  the  death  of  the  drawer  of  a 
bill  of  exchange  does  not  alter  the  relations  of  the  parties.  A  bank  check 
is  substantially  the  same  as  an  inland  bill  of  exchange ;  it  passes  by  delivery 
when  payable  to  bearer,  and  the  nile  as  to  presentment,  dihgence  of  the 
holder,  etc.,  which  are  applicable  to  one  are  generally  applicable  to  the 
other. 

Checks  are  in  use  only  between  banks  and  bankers  and  their  custom- 
ers, and  are  designed  to  facilitate  banking  operations.  It  is  of  their  very 
essence  to  be  payable  on  demand,  because  the  contract  between  the  banker 
and  customer  is  that  the  money  is  payable  on  demand.  A  check  on  a 
banker  is,  in  legal  effect,  an  inland  bill  of  exchange,  drawn  on  a  banker, 
payable  to  bearer,  on  demand,  and  subject,  in  general,  to  the  niles  which 
regulate  the  rights  and  liabilities  of  parties  to  bills  of  exchange. 

Cashier's  Check. — A  cashier's  check,  so-called,  differs  radically  from 
an  ordinary  check.  The  latter  *  *  *  is  an  order  upon  a  bank  pur- 
porting to  be  drawn  upon  a  deposit  of  funds,  for  the  payment  of  a  certain 
sum  of  money  to  a  person  named,  or  to  order  or  bearer,  on  demand.  As 
between  himself  and  the  bank,  the  drawer  of  the  check  has  the  power  of 
countermanding  his  order  of  payment  at  any  time  before  the  bank  has 
paid  it,  or  committed  itself  to  pay  it.  When  the  check,  however,  is  certi- 
fied by  the  bank,  the  power  of  revocation  by  the  drawer  ceases,  and  the 
bank  becomes  the  debtor.     A  cashier's  check  is  of  an  entirely  different 


354  NEGOTIABLE   INSTRUMENTS   LAW 

nature.  It  is  a  bill  of  exchange,  drawn  by  the  bank  upon  itself,  and  is 
accepted  by  the  act  of  issuance;  and,  of  coiirse,  the  right  of  countermand, 
as  applied  to  ordinary  checks,  does  not  exist  as  to  it. 

Effect  of  memorandum  on  check. 

TnsflimSTDNNfflmi&LEzCHANGEBAHK^'^ 


The  bank  on  which  this  check  is  drawn  is  in  no  manner  concerned  in 
the  written  memorandum,  "In  full  satisfaction  of  all  claims  to  date." 
It  is  however  important  to  the  payee,  and  unless  he  is  satisfied  to  accept 
the  amotmt  in  full  satisfaction  he  should  return  it  to  the  debtor.  The 
payee  would  not  relieve  himself  from  liability  by  striking  out  the  memor- 
andtmi  without  authority.  In  the  case  here  illustrated  Dr.  Fuller  sent 
the  maker  a  bill  for  S670  for  services.  The  maker  disputed  the  amount 
and  mailed  a  check  for  $400,  as  above.  Fuller  retained  and  collected  the 
check,  and  again  sent  a  bill  for  the  full  amount,  crediting  the  sirni  of 
$400,  represented  by  the  check.  The  maker  thereupon  wrote  Fuller  that 
he  did  not  recognize  Fuller's  right  to  retain  the  check  and  repudiate  the 
conditions,  and  requesting  him  to  return  the  money  or  retain  it  on  the 
condition  named.  In  an  action  for  the  balance  of  the  bill  held,  that 
there  was  in  law  an  accord  and  satisfaction  and  no  recovery  thereon  coiild 
be  sustained;  that  upon  receipt  of  the  letter.  Fuller  had  the  alternative, 
the  prompt  return  of  the  money  or  the  extinguishment  of  the  debt.  This 
rule  would  not  apply  where  the  amount  of  the  accoimt  was  liquidated. 

Fuller  V.  Kamp,  138  N.  Y.  231 ;  Tonslee  v.  Healey,  39  Vt.  522;  Baird  v. 
U.  S.,  96  U.  S.  430;  Jaffray  v.  Davis,  124  N.  Y.  164;  Bull  v.  Bull,  43  Conn. 
455;  Hilliard  v.  Noyes,  58  N.  H.  312;  Brick  v.  Plymouth,  63  Iowa,  462; 
Hinkle  v.  Minneapolis  R.  R.  Co.,  31  Minn.  434;  Earns  v.  Prosser,  157 
N.  Y.  290. 

A  bill  of  exchange  drawn  on  a  bank,  if  payable  on  demand,  is  a  check, 
and  such  a  bill  is  payable  on  demand  unless  a  specific  date  of  payment  is 
mentioned. 


PROMISSORY   NOTES   AND   CHECKS  355 

Riddle  v.  Bank  of  Montreal,  145  App.  Div.  (N.  Y.)  207. 

The  distinction  between  a  bill  and  a  check  is  that  the  former  is  not 
payable  on  demand,  while  the  latter  is.  It  does  not  depend  upon  the 
question  whether  drawn  on  a  bank  or  banker. 

Bowen  v.  Newell,  8  N.  Y.  190;  Harrison  v.  National  Bank,  41  Minn. 
488;43N.  W.  336. 

Payment  by  check. — The  giving  of  a  check  to  a  creditor  is  not  in 
itself  a  satisfaction  of  the  debt  unless  the  check  is  paid. 

Burkhalter  v.  Second  National  Bank,  42  N.  Y.  538;  Cooney  v.  U.  S. 
Wringer  Co.,  101  111.  468;  Sutton  v.  Bald^nn,  146  Ind.  341;  People's 
Bank  v.  Gilford,  108  Iowa  277;  Union  Biscuit  Co.  v.  Grocery  Co.,  143 
Mo.  App.  300;  Bradford  v.  Fox,  38  N.  Y.  289. 

See  also,  Harris  v.  Clark,  3  N.  Y.  93. 

§  322.  Within  what  time  a  check  must  be  presented.      A 

check  must  be  presented  for  payment  within  a  reasonable 
time  after  its  issue  or  the  drawer  will  be  discharged  from 
liability  thereon  to  the  extent  of  the  loss  caused  by  the  delay. 

Variant. — The  Illinois  statute  adds  "and  notice  of  dishonor  as  pro- 
vided for  in  case  of  bills  of  exchange"  after  the  word  "issue." 


This  section  applies  only  to  the  rights  of  the  drawer ;  as  to  the  indorser 
see  notes  Section  131. 

In  order  to  hold  the  drawer  it  is  necessary  that  the  holder  make 
presentment. 

Dolph  V.  Rice,  18  Wis.  397;  Herker  v.  Anderson,  21  Wend.  372. 

While  as  between  the  holder  and  drawer  of  a  check,  presentment 
may  be  made  at  any  time,  and  delay  in  presentment  does  not  discharge 
the  liability  of  the  drawer,  unless  loss  has  resulted  to  him,  a  different  rule 
obtains  as  between  the  holder  and  indorser. 

Carroll  v.  Sweet,  128  N.  Y.  19;  Bull  v.  Bank,  123  U.  S.  105. 

The  transfer  of  a  check  to  successive  holders  does  not  extend  the  time 
for  presentment.  If  not  presented  in  a  reasonable  time  the  drawer  is 
discharged  to  the  extent  of  the  loss  sustained  by  reason  of  the  failure  to 
present. 

Gordon  v.  Levin,  194  Mass.  418;  Gregg  v.  Beane,  37  Atl.  (Vt.)  248; 
Dehoust  V.  Lewis,  128  App.  Div.  (N.  Y.)  131;  Veazie  Bank  v.  Winn, 
40  Me.  60;  First  National  Bank  v.  Mackey,  157  111.  App.  408. 


356  NEGOTIABLE    INSTRUMENTS    LAW 

In  order  to  charge  a  payee  indorser,  the  bank  must  present  the  check 
to  the  drawer  bank  without  delay.  The  paying  bank  will  not  be  con- 
sidered as  agent  of  the  payee  and  must  suffer  from  the  acts  of  its  own 
negligence. 

Albi  V.  Evansville  Bank,  124  Wis.  73;  102  N.  W.  329;  68  L.  R.  A.  964. 

Reasonable  time. — See  Section  4.  Reasonable  time  is  not  fixed  by 
the  statute,  but  by  consensus  of  authority,  in  the  absence  of  special 
circumstances  of  excuse,  is  limited  to  the  next  business  day,  or,  if  the 
bank  upon  which  the  check  is  drawn  is  at  another  place,  the  check  must 
be  for^varded  to  the  place  of  payment  on  the  next  business  day,  and  pre- 
sented at  latest  upon  the  day  following  its  receipt  at  the  place  of  payment. 

Gifford  V.  Hardell,  60  N.  W.  (Wis.)  1064;  Albi  v.  Bank,  124  Wis.  73; 
Industrial  Saving  Co.  v.  Weakley,  103  Ala.  458;  Brown  v.  Johnson,  12 
N.  C.  293. 

Where  a  check  is  sent  by  mail  and  received  by  the  payee  the  day 
after  it  is  drawn,  the  reasonable  time  for  presentation  to  the  drawee  is 
extended  only  until  the  expiry  of  the  day  following  its  receipt. 

Dehoust  V.  Lewis,  128  App.  Div.  131;  Carroll  v.  Smith,  128  N.  Y. 
19,  22. 

In  Furber  v.  Dane,  203  Mass.  108  (89  N.  E.  227),  the  court  held, 
that  a  delay  of  two  days  by  the  holder  in  the  presentment  discharged  the 
drawer,  and  the  right  of  the  holder  was  no  greater  than  the  general  credit- 
ors. 

For  the  same  rule  see,  Babcock  v.  City,  137  Pac.  Rep.  899;  National 
Bank  v.  Weil,  141  Pa.  St.  457;  Brown  v.  Schnitz,  202  111.  509;  Cox  v. 
Citizens  Bank,  85  Pac.  (Kans.)  762;  Hamilton  v.  Salt  Co.,  54  N.  W. 
(Mich.)  903;  Bank  v.  Carroll,  116  N.  W.  (Neb.)  276. 

Ordinarily  between  drawer  and  drawee,  where  a  check  is  payable  in 
the  same  town  in  which  it  is  given,  it  should  be  presented  the  day  of  its 
receipt  or  the  next  day. 

Dehoust  V.  Lewis,  128  App.  Div.  (N.  Y.)  131;  Smith  v.  Miller,  43 
N.  Y.  171;  S.  B.  &  N.  Y.  R.  R.  v.  Collins,  57  N.  Y.  641;  Loux  v.  Fox, 
171  Pa.  St.  68. 

Allowance  must  be  given  for  the  presentment  of  a  check  mailed  to 
another  location.  In  general  it  is  required  that  the  person  receiving  such 
check,  in  the  absence  of  special  circimistances,  forward  it  for  presentment 
not  later  than  the  day  of  its  receipt,  and  the  agent  to  whom  it  is  thus 
forwarded  present  it  for  payment  not  later  than  the  day  it  is  received  by 
him. 

Brady  on  Law  of  Bank  Checks,  100;  Rosenthal  v.  Ehrlicher,  154  Pa. 
St.  396;  N.  M.  Coal  Co.  v.  Bowman,  28  N.  W.  (la.)  150;  Lloyd  v.  Osborne, 
65  N.  W.  (Wis.)  859;  Buckhannon  v.  National  Bank,  31  Atl.  (Md.)  302; 


PROMISSORY   NOTES   AND   CHECKS  357 

Haggerty  v.  Baldwin,  131  Mich.  187;  Carroll  v.  Sweet,  9  Misc.  382; 
Gifford  V.  Hardell,  88  Wis.  528;  Plover  Savings  Bank  v.  Moody,  110 
N.  W.  (la.)  29;  Deboust  v.  Lewis,  128  App.  Div.  (N.  Y.)  131;  Williams  v. 
Brown,  53  App.  Div.  (N.  Y.)  486;  Stilzberger  &  Sons  Co.  v.  Cramer,  170 
App.  Div.  114. 

Failure  to  present  a  check  within  a  reasonable  time  does  not  exon- 
erate the  drawer  unless  there  has  been  a  loss. 

Baldwin's  Bank  v.  Smith,  215  N.  Y.  76;  Watt  v.  Cans,  114  Ala.  264; 
Simpson  v.  Pacific  Ins.  Co.,  44  Cal.  139;  N.  W.  Coal  Co.  v.  Bowman,  69 
Iowa  150;  Grange  v.  Reigh,  93  Wis.  552;  Woodruff  v.  Plant,  41  Conn.  344; 
Stevens  v.  Park,  73  111.  387. 

Payment  through  clearing  house. — Some  courts  hold  that  presenta- 
tion of  a  check  through  the  clearing  house  does  not  add  to  the  period 
within  which  presentment  is  required.  (Holmes  v.  Roe,  28  N.  W.  (Mich.) 
864;  Rosenblatt  v.  Haberman,  8  Mo.  App.  486.)  The  rule,  however, 
followed  by  most  of  the  states  in  this  regard  is  announced  by  the  courts 
of  New  York  and  Pennsylvania  which  hold  that,  where  a  check  is  de- 
livered after  banking  hours,  the  holder  is  not  bound  to  present  it  for 
payment  on  the  following  day,  but  may  deposit  it  in  his  bank  on  such 
day,  and  a  presentment  by  such  bank  through  the  clearing  house  on  the 
second  day  after  delivery  is  sufficient. 

Brady  on  Checks,  104;  Zaloon  v.  Garvin,  72  Misc.  36;  Columbia- 
Knickerbocker  Trust  Co.  V.  Miller,  215  N.  Y.  191;  Hentz  v.  National  City 
Bank,  159  App.  Div.  743;  Willis  v.  Finley,  173  Pa.  St.  28. 

Presentment  after  death  of  drawer.— Where  a  bank  has  paid  a 
check  drawn  by  a  depositor,  but  without  knowledge  of  his  death  and  in 
due  course  of  business,  the  administrator  of  such  depositor  cannot  recover 
from  the  bank  the  amount  so  paid,  although  the  check  was  not  presented 
to  or  paid  by  the  bank  until  after  the  death  of  the  depositor. 

Glennan  v.  Rochester  T.  and  S.  D.  Co.,  209  N.  Y.  12;  2  Dan.  Neg. 
Inst.  569;  52  L.  R.  A.  302;  Matter  of  Stacey,  89  Misc.  88;  Long  v.  Thayer, 
150  U.  S.  520. 

Where  the  payee  of  a  check  collects  it  after  the  death  of  the  drawer, 
the  estate  may  maintain  an  action  against  the  payee  to  recover  the  amount. 

In  re  Adamson,  154  N.  Y.  Supp.  667;  Bainbridge  v.  Hoes,  163  App. 
Div.  (N.  Y.)  870;  Matter  of  Stacy,  152  N.  Y.  Supp.  717. 

Where  a  savings  bank  account  was  opened  in  the  names  of  a  husband 
and  wife,  and  there  was  no  evidence  as  to  the  ownership  at  the  time  of  the 
deposit,  or  as  to  any  agreement  that  it  was  to  be  jointly  or  otherwise  owned, 
it  was  held  that  upon  the  death  of  the  husband,  the  wife  was  entitled  to 
the  entire  deposit. 


358  NEGOTIABLE   INSTBUMENTS   LAW 

In  re  Missionary  Society,  160  N.  Y.  Supp.  and  cases  cited. 

The  death  of  the  maker  of  a  check  delivered  to  the  payee  three  days 
before  his  death  revokes  the  payee's  authority  to  draw  the  money,  and 
although  the  check  ha\4ng  been  deposited  in  the  payee's  bank  on  which 
it  was  drawn  two  days  after  the  maker's  death,  the  fund  constitutes  a 
part  of  the  maker's  estate. 

Matter  of  Mead,  90  Misc.  263. 

§  323.  Certification  of  check;  effect  of.  Where  a  check 
is  certified  by  the  bank  on  which  it  is  drawn  the  certification 
is  equivalent  to  an  acceptance. 

In  certifying  a  check  the  bank  virtually  says  that  the  check  is  good, 
we  have  the  money  of  the  drawer  here  ready  to  pay  it.  We  will  pay  it 
now  if  you  will  receive  it.  The  holder  says  no,  I  will  not  take  the  money; 
you  may  certify  the  check  and  retain  the  money  for  me  tmtil  the  check 
is  presented. 

National  Bank  of  Jersey  City  v.  Leach,  52  N.  Y.  350;  Carnegie  Trust 
Co.  V.  First  National  Bank,  213  N.  Y.  307;  Times  Square  Auto  Co.  v. 
Rutherford  Bank,  77  N.  J.  649. 

A  bank  certifying  a  check  does  not  warrant  the  genuineness  of  the 
title  of  the  payee  or  holder,  and  in  this  case  the  payee  and  holder  has  no 
title  to  the  check,  and  cannot  enforce  it. 

M.  National  Bank  v.  National  C.  Bank,  59  N.  Y.  67;  Cont.  National 
Bank  v.  Tradesmen's  Bank,  173  N.  Y.  272. 

Where  a  check  is  certified,  the  drawer  of  the  check  cannot  draw  out 
the  funds  then  in  the  bank  necessary  to  meet  the  certified  check,  as  the 
money  is  no  longer  his. 

Schlessinger  v.  Kurzrok,  47  Misc.  637;  First  National  Bank  v.  Leach, 
52  N.  Y.  350. 

A  bank  which  has  certified  the  check  of  a  depositor  payable  to  his 
own  order  becomes  as  acceptor  primarily  liable  thereon  to  any  bona  fide 
holder  thereof. 

Poess  V.  Twelfth  Ward  Bank,  43  Misc.  45. 

A  bank  upon  certification  of  a  check  becomes  the  primary  debtor, 
and  cannot  thereafter  refuse  to  pay  it  in  order  to  make  a  set-ofif  available 
to  its  depositor. 

Carnegie  Trust  Co.  v.  First  National  Bank,  213  N.  Y.  301 ;  reversing 
156  App.  Div.  712. 

The  certification  of  checks  is  well  known  to  be  one  of  the  greatest 
dangers  to  the  integrity  of  their  fimds  with  which  banks  have  to  contend. 
The  power  to  certify  checks,  tmless  guarded  and  restrained,  is  nothing 
less  than  the  power  of  a  corrupt  letter,  or  other  servant  to  give  away  the 


PEOMISSORY   NOTES   AND   CHECKS  359 

funds  of  the  bank.  Such  abuses  have  been  produced  by  the  exercise  of 
this  power  that  prudent  banks,  as  is  well  known,  have  generally  discon- 
tinued the  practice  of  certifying  checks,  and  have  substituted  therefor  the 
practice  of  taking  up  the  check  tendered  for  certification  and  issuing  in 
its  place  their  owti  cashier's  check,  which  is  tantamount  to  their  own 
promissory  note. 

Bank  of  Springfield  v.  First  National  Bank,  30  Mo.  App.  271. 

Certification  of  post-dated  check. — "Where  a  post-dated  check  is 
certified  by  the  cashier  of  the  bank  on  which  it  is  drawn  to  be  'good,'  by 
indorsement  thereon,  before  the  day  of  its  date,  the  instrument,  upon  its 
very  face,  commimicates  facts  and  information  to  persons  receiving  the 
same  that  the  cashier,  in  making  such  certification,  was  not  acting  within 
the  known  limits  of  his  power,  and  that  he  was  clearly  exceeding  them." 

Clarke  National  Bank  v.  Bank  of  Albion,  52  Barb.  (N.  Y.)  592. 

This  case  is  cited  \\dth  approval  in  1  Morse,  Banks  and  Banking  (4th 
ed.),  Sec.  413,  and  the  author  says: 

"When  a  post-dated  check  is  certified  before  maturity,  it  carries 
notice  to  all  that  the  certification  was  beyond  the  officer's  authority." 

Certification  of  a  raised  check. — A  bank  which  certifies  a  raised  check 

and  afterwards  pays  it  is  entitled  to  recover  the  amount  from  the  bank  to 
which  it  was  paid.  The  certification  warrants  the  genuineness  of  the 
drawer's  signature  and  that  he  has  ftmds  on  deposit,  which  will  be  held 
for  the  pa}Tnent  of  the  check,  but  does  not  warrant  the  genuineness  of 
the  body  of  the  check.  It  is  no  defense  for  the  collecting  bank  to  say  that 
the  drawee  bank  was  negligent  in  failing  to  detect  the  alteration,  for  the 
opportunity  of  discovering  the  alteration  was  equally  open  to  the  col- 
lecting bank. 

National  Reserve  Bank  v.  Com  Exchange  Bank,  157  N.  Y.  Supp.  316; 
171  App.  Div.  195;  Udam  v.  Manufacturers'  National  Bank,  116  Supp. 
595;  Merchants  Bank  v.  Baird,  160  Fed.  642;  Continental  Bank  v.  Metro- 
politan Bank,  107  111.  App.  455;  Blake  v.  Hamilton  Sav.  Bank,  79  Ohio 
St.  189;  Jackson  Paper  Co.  v.  Commercial  Bank,  199  111.  151 ;  Continental 
National  Bank  v.  Tradesmen's  National  Bank,  173  N.  Y.  272;  Epsy  v. 
National  Bank  of  Cincirmati,  85  U.  S.  604. 

Stopping  pajrment  of  certified  check. — It  is  a  general  rule  that  pay- 
ment of  a  certified  check  cannot  be  stopped  as  against  a  holder  in  due 
course,  and  it  makes  no  difference  whether  the  check  was  certified  at  the 
instance  of  the  drawer  or  of  some  person  to  whom  it  was  negotiated. 

Meridian  National  Bank  v.  First  National  Bank,  7  Ind.  App.  322, 
33  N.  E.  Rep.  237;  Pease  &  Dvryer  v.  State  National  Bank,  114  Tenn. 


360  NEGOTIABLE   INSTRUMENTS   LAW 

693,  88  S.  W.  Rep.  172;  Poess  v.  Twelfth  Ward  Bank,  43  Misc.  Rep.  45, 
86  N.  Y.  Supp.  857. 

But  if  the  certification  is  induced  by  mistake,  and  the  ri.G;hts  of  no 
third  party  have  intervened,  and  the  holder  has  lost  nothing,  nor  changed 
his  position  in  reliance  upon  the  certification,  the  certifying  bank  may  be 
relieved  from  liability,  and  is  justified  in  carrying  out  the  drawer's  instruc- 
tions not  to  pay  the   check. 

Carnegie  Trust  Co.  v.  First  National  Bank,  141  N.  Y.  Supp.  745; 
213  N.  Y.  301;  Cleus  v.  Bank  of  New  York,  114  N.  Y.  70;  National  Com- 
mercial Bank  v.  Miller,  77  Ala.  168;  54  Am.  Rep.  50;  Pease  v.  Dwyer, 
88  S.  W.  (Tenn.)  693;  Blake  v.  Hamilton  Sav.  Bank,  79  Ohio  St.  189; 
88  N.  W.  724;  Drinkall  v.  Bank,  88  N.  W.  724;  Mt.  Morris  Bank  v. 
Twenty-third  Ward  Bank,  172  N.  W.  244;  B.  and  K.  Mfg.  Co.  v.  Citizens 
Trust  Co.,  93  Misc.  94;  Merchants  Bank  v.  First  National  Bank,  116  Ark.  1. 

Certification  by  mistake. — If  the  bank  certifies  a  check  to  be  good  by 
mistake,  under  the  erroenous  impression  that  the  drawer  had  fimds  on 
deposit,  when  in  fact  he  had  none,  or  has  been  induced  by  some  fraudulent 
representation  to  certify  it  as  good,  the  certification  may  be  revoked 
and  annulled,  provided  no  change  of  circvimstances  has  occurred  which 
could  render  it  inequitable  for  such  right  to  be  exercised.  If  the  check 
still  remains  in  the  hands  of  the  holder  who  held  it  when  it  was  certified, 
and  the  mistake  is  discovered  and  notified  to  him  so  speedily  that  he  has 
time  afforded  him  to  notify  and  preserve  the  Hability  of  indorsers,  the 
bank  may  retract  its  certificate.  But  if  another  person  has  become  the 
holder  of  it,  or  circimistances  have  so  changed  that  the  rights  of  the 
holder  woiild  be  prejudiced,  and  especially  if  it  has  been  paid  to  a  bona 
fide  holder  without  notice,  it  is  absolutely  estopped  from  doing  so. 

Ir\4ng  National  Bank  v.  Wetherald,  36  N.  Y.  335;  Second  National 
Bank  v.  Western  National  Bank,  51  Md.  133;  S.  C,  34  Am.  Rep.  300; 
Rankin  v.  Colonial  Bank,  31  Misc.  227. 

Certification  to  be  in  writing. — By  Section  220  it  becomes  necessary 
that  a  binding  certification  be  in  writing.  Where  the  holder  of  a  check 
wires  the  bank  asking  whether  there  are  sufficient  funds  to  meet  it  and  he 
receives  a  reply  in  the  affirmative,  it  was  held  that  this  constituted  only 
an  assurance  that  the  check  was  good  at  the  time  of  the  sending  of  the 
telegram  and  not  a  certification. 

Kahn  v.  Walton,  46  Ohio  St.  197;  National  Bank  v.  Commercial 
Bank,  87  Pac.  746;  Myers  v.  Union  Bank,  27  111.  App.  254. 

But  where  a  bank  in  response  to  a  telegram  as  to  whether  it  would 
pay  a  check,  answered  that  it  would,  it  was  held,  to  be  a  certification  which 
bound  the  bank. 


PKOMISSOKY   NOTES   AND   CHECKS  361 

Henrietta  Bank  v.  State  Bank,  16  S.  W.  (Tex.)  321;  Atchinson 
Bank  v.  Garretson,  51  Fed.  168. 

A  bank  being  asked  to  cash  a  check  on  another  bank,  telephoned 
to  the  drawee  bank  and  was  informed  that  the  check  was  "good,"  and 
thereupon  cashed  the  check,  but  before  presentment  for  payment  the 
drawer  notified  the  drawee  bank  not  to  pay  it.  It  was  held  that,  for  the 
reason  it  was  not  accepted  or  certified  in  writing,  the  drawee  bank  was 
not  liable. 

Van  Buskirk  v.  Bank,  83  Pac.  (Colo.)  142. 

For  cases  on  the  subject  generally,  see  Evansville  Bank  v.  G.  A. 
Bank,  155  U.  S.  556;  Boon  Co.  Bank  v.  Latimer,  67  Fed.  Rep.  27;  Wallace 
V.  Stone,  107  Mich.  109;  Libby  v.  Hopkins,  104  U.  S.  303;  Western  Tie 
Co.  V.  Brown,  196  U.  S.  502;  Meuer  v.  Phoenix  National  Bank,  94  App. 
Div.  (N.  Y.)  331;  American  National  Bank  v.  Miller,  229  U.  S.  517; 
M.  M.  Bank  v.  T.  T.  W.  Bank,  172  N.  Y.  244;  Goshen  National  Bank  v. 
Bingham,  118  N.Y.  349. 

§  324.  Effect  where  holder  of  check  procures  it  to  be 
certified.  Where  the  holder  of  a  check  procures  it  to  be 
accepted  or  certified  the  drawer  and  all  indorsers  are  discharged 
from  liability  thereon. 

The  certification  of  a  bank  check  is  not,  in  all  respects,  like  the  making 
of  a  certificate  of  deposit,  or  the  acceptance  of  a  bill  of  exchange,  but  that 
it  is  a  thing  sui  generis  and  that  the  effect  of  it  depends  upon  the  person 
who,  in  his  own  behalf,  or  for  his  own  benefit,  induces  the  bank  to  certify 
the  check.  The  weight  of  authority  is  that  if  the  drawer  in  his  own 
behalf,  or  for  his  benefit,  gets  his  check  certified,  and  then  delivers  it  to 
the  payee,  the  drawer  is  not  discharged;  but  that  if  the  payee  or  holder, 
in  his  own  behalf  or  for  his  own  benefit,  gets  it  certified  instead  of  getting 
it  paid,  then  the  drawer  is  discharged. 

Minot  V.  Russ,  156  Mass.  458;  Cullen  v.  Union  Surety  Co.,  79  App. 
Div.  (N.  Y.)  412. 

Certification  at  instance  of  drawer.— The  certification  of  a  check,  if 
made  at  the  instance  of  the  drawer,  does  not  become  effective  until  the 
issuance  and  delivery  of  the  check  to  the  payee,  for  the  implied  obligation 
of  the  bank  is  to  pay  the  money  deposited  to  the  depositor  or  to  his  order. 

G.  N.  Bank  v.  Bingham,  118  N.  Y.  349,  7  L.  R.  A.  595,  765;  Lynch  v. 
First  National  Bank,  etc.,  107  N.  Y.  179;  Thomson  v.  Bank  of  British 
North  America,  82  N.  Y.  1 ;  Shipman  v.  Bank  of  New  York,  126  N.  Y.  318; 
12  L.  R.  A.  791;  Bank  of  British  North  America  v.  Merchants'  National 


362  NEGOTIABLE   INSTBUMENTS   LAW 

Bank,  91  N.  Y.  106;  Citizens'  National  Bank  v.  Importers  and  Traders' 
Bank,  119  N.  Y.  195;  Kearney  v.  Met.  Trust  Co.,  110  App.  Div.  236,  97 
N.  Y.  Supp.  274;  Carnegie  Trust  Co.  v.  First  National  Bank,  156  App. 
Div.  712,  141  N.  Y.  Supp.  745;  Freund  v.  Importers',  etc..  Bank,  76  N.  Y. 
352;  see  Nassau  Bank  v.  Broadway  Bank,  54  Barb.  236;  First  National 
Bank  v.  Leach,  52  N.  Y.  350;  Worth  v.  Case,  42  N.  Y.  362. 

When  a  bank  at  the  request  of  the  drawer  of  a  check  certifies  it  before 
delivery  to  the  payee  and  it  is  then  delivered,  the  certification  does  not 
discharge  the  drawer  if  the  check  is  not  paid  on  due  presentment.  The 
certification  simply  vouches  for  the  genuineness  of  the  check  and  that 
it  will  be  paid  on  presentment,  and  merely  adds  to  its  easy  negotiation  by 
adding  the  promise  of  the  bank. 

Born  V.  Bank,  123  Ind.  78,  24  N.  E.  173,  7  L.  R.  A.  442,  18  Am. 
St.  Rep.  312;  Oyster  and  Fish  Co.  v.  Bank,  51  Ohio  St.  106,  36  N.  E.  833; 
Minot  V.  Russ,  156  Mass.  458,  31  N.  E.  489,  16  L.  R.  A.  510,  32  Am.  St. 
Rep.  472;  Blake  v.  Hamilton  Dime  Sav.  Bk.  Co.,  79  Ohio  St.  189,  87 
N.  E.  73,  20  L.  R.  A.  (N.  S.)  290,  128  Am.  St.  Rep.  691  and  696,  16  Am. 
Cas.  210. 

The  certification  of  a  check  is  charged  against  the  drawer,  the  remedy 
of  the  holder  being  against  the  bank,  unless  the  certification  is  obtained 
at  the  instance  of  the  drawer,  in  which  case,  if  he  gets  it  certified  and  puts 
it  in  circulation,  he  is  still  liable  in  case  the  bank  does  not  pay. 

Minot  V.  Russ,  156  Mass.  458. 

Where  the  drawer  of  a  check  has  it  certified  before  delivery,  the 
certification  operates  merely  as  an  assurance  that  the  check  is  genuine, 
and  the  drawer  is  not  discharged  from  liability. 

Davenport  v.  Palmer,  152  App.  Div.  761;  Minot  v.  Russ,  156  Mass. 
458;  Bom  v.  First  National  Bank,  123  Ind.  78;  Oyster  Co.  v.  Bank,  51 
Ohio  St.  106;  Bickford  v.  Bank  of  Chicago,  42  111.  238;  Randolph  Bank  v. 
Homblower,  160  Mass.  401. 

If  the  drawer  gets  the  bank  to  certify  his  check  and  then  delivers  it 
to  the  holder,  and  the  latter  neglects  to  present  it  to  the  bank  for  payment 
in  due  course  the  drawer  is  discharged  to  the  extent  he  suffers  by  the 
delay. 

Heartt  v.  Rhodes,  66  111.  351;  Blair  v.  Wilson,  28  Graft.  (69  Va.) 
165,  171;  Larsen  v.  Breene,  12  Colo.  480,  484,  21  Pac.  498. 

Certification  at  instance  of  payee. — The  effect  of  a  certification  of  a 
check  at  the  instance  of  the  payee,  or  other  holder  thereof,  is  to  create  a 
new  contract  between  the  drawee  and  the  payee,  or  other  holder,  for  the 
payment  of  the  amoimt  thereof,  and  the  drawer  is  thereby  released  from 
liability  thereon. 


PROMISSORY   NOTES   AND   CHECKS  363 

Meuer  v.  Phenix  National  Bank,  94  App.  Div.  331,  88  N.  Y.  Supp.  83, 
affirmed  183  N.  Y.  511;  First  National  Bank  of  Jersey  City  v.  Leach,  52 
N.  Y.  350;  Freund  v.  Importers',  etc..  Bank,  76  N.  Y.  352;  see  also,  Carne- 
gie Trust  Co.  V.  First  National  Bank  of  City  of  N.  Y.,  156  App.  Div.  712, 
141  N.  Y.  Supp.  745. 

This  rule  is  logically  and  necessarily  confined  to  cases  in  which  the 
check  is  certified  at  the  instance  of  the  payee,  or  other  holder  thereof  in 
due  course. 

Thomson  v.  Bank  of  British  North  America,  supra;  Hartford  v. 
Greenwich  Bank,  157  App.  Div.  448;  142  N.  Y.  Supp.  387;  see  also, 
Morrison  v.  Chapman,  155  App.  Div.  509,  140  N.  Y.  Supp.  700. 

If  the  holder  receive  an  uncertified  check,  and  instead  of  drawing 
the  money  has  it  certified,  he  discharges  the  drawer  for  he  has  accepted 
the  bank  as  his  sole  debtor;  the  same  as  if  he  had  drawn  the  money,  then 
deposited  it,  and  taken  a  certificate  of  deposit  for  it. 

Met.  National  Bank  v.  Jones,  137  111.  634,  27  N.  E.  533,  12  L.  R.  A. 
492,  31  Am.  St.  Rep.  403;  Born  v.  Bank,  123  Ind.  78,  24  N.  E.  173,  7 
L.  R.  A.  442,  18  Am.  St.  Rep.  312;  Oyster  and  Fish  Co.  v.  Bank,  51  Ohio 
St.  106,  36  N.  E.  833,  128  Am.  St.  Rep.  691  and  696;  Meuer  v. 
Phoenix  National  Bank,  94  App.  Div.  331;  First  National  Bank  v.  Leach, 
52  N.  Y.  350;  Meuer  v.  Phoenix  National  Bank,  183  N.  Y.  511. 

Where  the  holder  procures  certification  of  a  check,  the  drawer  is 
discharged  and  the  bank  becomes  the  debtor  to  the  holder,  and  can  not 
avoid  payment  by  showing  that  the  holder  obtained  the  check  from  the 
drawer  by  false  pretenses.  The  certification  has  the  same  effect  as  if  the 
holder  had  drawn  the  money,  re-deposited  it  and  taken  a  certificate  of 
deposit  for  it. 

Times  Automobile  Co.  v.  Bank,  73  Atl.  (N.  J.)  479. 

Where  a  bank  through  the  mistake  of  its  teller  certifies  a  check 
upon  which  the  payment  has  previously  been  stopped,  and  the  check  has 
not  left  the  hands  of  the  payee  who  shows  no  change  of  circumstances  and 
no  harm  or  injury  to  himself,  and  where  the  drawer  is  not  discharged  by 
the  certification  for  the  reason  that  he  has  himself  created  the  situation 
by  stopping  payment  before  the  mistaken  certification  is  made,  the  case 
is  taken  out  of  the  rule  of  liabiUty  of  a  bank  upon  its  certification,  and  no 
recovery  against  the  bank,  upon  suit  by  such  payee,  will  lie. 

B.  and  K.  Mfg.  Co.  v.  Citizens  Trust  Co.,  93  Misc.  94. 

For  cases  on  subject  generally,  see  Lyons  v.  Union  National  Bank, 
150  App.  Div.  493;  Cooke  v.  State  National  Bank,  52  N.  Y.  115;  National 
Bank  of  Jersey  City  v.  Leach,  52  N.  Y.  350;  Gallo  v.  Brooklyn  Savings 
Bank,  199  N.  Y.  222;  Meuer  v.  Phenix  Bank,  183  N.  Y.  511. 


364  NEGOTIABLE   INSTRUMENTS   LAW 

§  325.  When    check    operates    as    an    assignment.     A 

check  of  itself  does  not  operate  as  an  assignment  of  any  part 
of  the  funds  to  the  credit  of  the  drawer  with  the  bank,  and  the 
bank  is  not  liable  to  the  holder,  unless  and  until  it  accepts  or 
certifies  the  check. 

This  is  undoubtedly  a  statement  of  law,  but  it  is  also  true  that  a  bank 
which  has  received  the  money  of  a  depositor  is  bound  to  honor  his  checks 
to  the  amount  of  his  funds,  and  is  liable  in  damages  to  the  depositor  for 
not  honoring  his  check,  where  it  has  sufficient  funds  to  meet  such  check; 
but  the  duty  of  the  bank  to  honor  the  check  where  there  are  sufficient 
funds  would,  of  course,  cease  upon  a  countermand  of  the  check  or  notice 
of  the  death  of  the  drawer. 

A  check  is  not  the  assignment  of  the  fund  on  deposit  to  the  credit 
of  the  drawer  pro  tanto,  and  the  holder  is  merely  the  agent  of  the  drawer 
for  the  piirpose  of  collecting  it,  and  upon  the  death  of  the  drawer  before 
presentation  the  authority  of  the  holder  is  revoked,  and  the  bank  is  no 
longer  authorized  to  pay;  but  on  principles  of  necessity  incident  to  the 
banking  business,  if  the  bank  pays  in  good  faith  and  without  notice  of  the 
death  of  the  drawer,  it  is  protected. 

Glennan  v.  Rochester  Trust  and  Safe  Deposit  Co.,  209  N.  Y.  12, 
102  N.  E.  537,  52  L.  R.  A.  (N.  S.)  302;  Pease  v.  State  Bank,  88  S.  M. 
(Tenn.)  172;  Tibley  Glass  Co.  v.  F.  and  M.  Bank,  220  Pa.  St.  1;  B.  &  O. 
R.  Co.  V.  First  National  Bank,  102  Va.  757;  Long  v.  Taylor,  150  U.  S. 
520;  Matter  of  Stacey,  89  Misc.  88. 

The  relation  of  debtor  and  creditor,  not  of  agent  and  principal,  exists 
between  a  bank  and  its  depositor.  The  money  deposited  becomes  a  part 
of  the  bank's  general  fimds  and  it  impHedly  contracts  to  pay  its  depositor's 
checks,  acceptances  and  notes  payable  at  the  bank  to  the  amount  of  his 
credit.  In  discharging  its  implied  obligation  it  pays  its  own  money  as  a 
principal,  not  its  depositor's  money  as  an  agent.  It  is  a  mere  drawee 
answerable  to  the  depositor  if  it  fails  to  fulfill  its  implied  contract  obliga- 
tion to  pay  notes  and  checks  drawn  by  the  depositor. 

Baldwin's  Bank  v.  Smith,  215  N.  Y.  76;  Commercial  Bank  v.  Arm- 
strong, 148  U.  S.  50;  First  National  Bank  v.  Murfreesboro  Bank,  127 
Tenn.  205. 

The  giving  of  a  check  is  not  the  creation  of  an  obhgation,  but  is  merely 
the  admission  by  the  drawer  of  the  existence  of  an  obligation  to  pay  a 
certain  sum  of  money.  It  imposes  no  obhgation  on  the  drawee  to  pay  the 
same  as  between  the  drawee  and  payee.  It  is  nothing  more  than  a  repre- 
sentation of  the  drawer  that  he  has  money  on  deposit  with  the  drawee 
subject  to  his  order,  with  an  implied  promise  on  the  part  of  the  drawee 


PKOMISSORY   NOTES   AND   CHECKS  365 

to  pay  the  amount  of  the  check  in  case  it  is  not  paid  or  accepted  by  the 
bank  on  which  it  is  drawn. 

Peninsular  Bank  v.  Penderson  Co.,  91  Wash.  623. 

This  section  is  intended  to  cover  the  Hability  of  a  bank  to  the  holder 
of  the  check,  and  he  can  recover  from  the  bank  when  he  brings  himself 
within  the  provisions  of  the  statute.  If  a  check  is  neither  accepted  nor 
certified,  there  is  no  liability  on  the  part  of  the  bank  to  the  holder. 

Elyria  Saving  Bank  v.  Bin,  HI  N.  E.  (Oh.)  147;  Covert  v.  Rhodes, 
48  Ohio  St.  66;  National  Bank  v.  Berrall,  70  N.  J.  L.  757;  Hove  v.  Bank, 
115  N.  W.  (la.)  476;  19th  Ward  Bank  v.  First  National  Bank,  184  Mass! 
49;  PoUak  v.  Niall,  137  Ga.  23;  Moore  v.  Norman,  52  Minn.  83;  Smith 
Co.  v.  Mitchell,  117  Ga.  772;  Consolidated  Bank  v.  First  National  Bank, 
199  N.  Y.  516;  Baldwin's  Bank  v.  Smith,  215  N.  Y.  76. 

United  States  Supreme  Court  cases  and  those  in  Illinois  and  Missouri 
which  follow  so  hold.  The  case  of  First  National  Bank  of  Washington  v. 
Whitman,  94  U.  S.  343,  24  L.  Ed.  229,  goes  into  the  question  in  detail. 
There  the  payee  brought  suit  against  the  bank  upon  which  the  check  was 
drawn,  upon  the  theory  that  the  payment  upon  the  forged  indorsement 
to  the  forger  operated  as  an  acceptance  by  the  banlv  of  the  check  sufficient 
to  authorize  an  action  by  the  real  owner  to  recover  thereon. 

U.  S.  Portland  Cement  Co.  v.  U.  S.  National  Bank,  157  Pac.  202; 
Balsam  v.  Mutual  Trust  Co.,  74  Misc.  465;  Dimcan  v.  Berlin,  69  N.  Y.  151. 

The  payee  of  a  check  which  has  not  been  accepted  by  the  bank  upon 
which  it  is  drawn,  cannot  maintain  an  action  against  the  bank,  even 
though  the  maker  had  on  deposit  sufficient  fimds  to  pay  it. 

Hentz  V.  National  City  Bank,  159  App.  Div.  (N.  Y.)  743;  Matter  of 
Estate  of  Stacey,  89  Misc.  88. 

For  cases  on  the  subject  generally,  see  A.  S.  American  Bank  v. 
National  City  Bank,  161  App.  Div.  (N.  Y.)  268;  Consolidated  National 
Bank  v.  First  National  Bank,  129  App.  Div.  (N.  Y.)  538;  Eastman  Kodak 
Co.  V.  National  Park  Bank,  231  Fed.  320. 

§  326.  Recovery  of  forged  check.  No  bank  shall  be 
liable  to  a  depositor  for  the  payment  by  it  of  a  forged  or  raised 
check,  unless  within  one  year  after  the  return  to  the  depositor 
of  the  voucher  of  such  payment,  such  depositor  shall  notify 
the  bank  that  the  check  so  paid  was  forged  or  raised. 

This  section  appears  only  in  the  statutes  of  New  York  and  New 
Jersey,  but  the  courts  in  most  of  the  states  have  held  that  the  depositor 
owes  the  bank  the  duty  of  making  an  examination  of  his  pass  book  and 
vouchers  for  the  purpose  of  discovering  any  unauthorized  payments 
which  may  have  been  made. 


366  NEGOTIABLE    INSTRUMENTS    LAW 

Leather  Mfgrs.  Bank  v.  Morgan,  117  U.  S.  96;  American  Bank  v. 
Bushey,  7  N.  W.  (Mich.)  725;  Bank  v.  Allen,  14  S.  Rep.  (Ala.)  335; 
Scanlon  v.  Germania  Bank,  97  N.  W.  (Minn.)  380;  N.  Y.  Exchange  Bank  v. 
Houston,  169  Fed.  785;  Nat.  Dredging  Co.  v.  President,  69  Atl.  (Del.) 
607;  Kenneth  v.  National  Bank,  77  S.  W.  (Mo.)  1002;  National  Bank  v. 
Richmond  Co.,  56  S.  E.  (Va.)  96;  Myers  v.  S.  W.  Bank,  193  Pa.  St.  1. 

"Primarily,  a  bank  may  pay  and  charge  to  its  depositors  only  such 
sums  as  are  duly  authorized  by  the  latter,  and  of  course  a  forged  check 
is  not  authority  for  such  payment.  It  is,  however,  permitted  to  a  bank 
to  escape  liability  for  re-payment  of  amounts  paid  out  on  forged  checks 
by  establishing  that  the  depositor  has  been  guilty  of  negligence  which 
contributed  to  such  payments  and  that  it  has  been  free  from  any  negli- 
gence." 

Morgan  v.  U.  S.  Mortgage  and  Trust  Co.,  208  N.  Y.  218,  222,  101 
N.  E.  871,  872,  L.  R.  A.  1915D,  741  Ann.  Cas.  1914D,  462. 

If  the  depositor  has  by  his  negligence  caused  loss  to  his  bank,  he 
should  be  responsible  for  the  damage  caused  by  his  default,  but  beyond 
this  his  liability  shoiild  not  extend. 

Critten  V.  Chemical  Bank,  171  N.  Y.  219,  229. 

The  relation  between  a  bank  and  a  depositor  is  that  of  debtor  and 
creditor,  and  the  law  implies  a  contract  on  the  part  of  the  bank  to  disburse 
the  money  standing  to  the  depositor's  credit  only  upon  his  order,  and  in 
conformity  with  his  directions;  no  payments  can  be  charged  against  a 
depositor  by  a  bank  unless  made  to  such  persons  as  the  depositor  directed. 
Payments  made  therefore  upon  forged  indorsements  are  at  its  peril.  It 
can  claim  protestion  upon  some  principle  of  estoppel,  or  because  of  some 
negligence  chargeable  to  the  depositor. 

Shipman  v.  Bank  of  State  of  New  York,  126  N.  Y.  318. 

A  depositor  who  sends  his  pass  book  to  be  written  up  and  receives 
it  back  with  his  paid  checks  as  vouchers,  is  bound  under  certain  circum- 
stances to  examine  the  pass  book  and  vouchers,  and  to  report  to  the 
bank  without  unreasonable  delay  any  errors  which  may  be  discovered. 

Morgan  v.  U.  S.  Trust  Co.,  208  N.  Y.  218;  Hardy  v.  Chesapeake 
Bank,  51  Md.  562. 

Rule  as  to  savings  banks. — The  liability  of  a  savings  bank  for  pay- 
ments made  upon  forged  drafts,  differs  from  that  of  ordinary  banks  of 
deposit,  which  are  absolutely  liable  for  payments  on  forged  checks  no 
matter  how  skillful  the  forgery  may  be.  A  savings  bank  is  not  liable  for 
payments  made  upon  a  forged  draft  unless  negligence  can  be  imputed  to 
it;  that  is  to  say,  unless  the  discrepancy  between  the  signature  is  so  marked 
and  plain  that  an  ordinary  competent  clerk  should  detect  the  forgery. 


PROMISSORY   NOTES   AND   CHECKS  367 

Noah  V.  Bank  for  Savings,  171  App.  Div.  (N.  Y.)  191;  Kelly  v. 
Buffalo  Savings  Bank,  180  N.  Y.  171;  see  Section  42. 

Pleadings. — The  statute  need  not  be  pleaded,  and  under  it  either 
party  may  prove  any  fact  which  may  establish  a  cause  of  action  or  defense 
if  the  pleadings  are  such  as  to  permit  it  under  the  general  rules. 

Shattuck  V.  Guardian  Trust  Co.,  204  N.  Y.  200. 


368  NEGOTIABLE   INSTRUMENTS    LAW 


ARTICLE  19 

Notes  Given  for  Patent  Rights  and  for  a  Speculative 
Consideration 

Section  330.  Negotiable  instruments  given  for  patent  rights. 

331.  Negotiable  instruments  given  for  a  speculative 

consideration. 

332.  How  negotiable  bonds  are  made  non-negotiable. 

§  330.  Negotiable  instruments  given  for  patent  rights. 

A  promissory  note  or  other  negotiable  instrument,  the  con- 
sideration of  which  consists  wholly  or  partly  of  the  right  to 
make,  use  or  sell  any  invention  claimed  or  represented  by  the 
vendor  at  the  time  of  sale  to  be  patented,  must  contain  the 
words  "given  for  a  patent  right"  prominently  and  legibly 
written  or  printed  on  the  face  of  such  note  or  instrument  above 
the  signature  thereto ;  and  such  note  or  instrument  in  the  hands 
of  any  purchaser  or  holder  is  subject  to  the  same  defenses  as 
in  the  hands  of  the  original  holder;  but  this  section  does  not 
apply  to  a  negotiable  instrument  given  solely  for  the  pur- 
chase price  or  the  use  of  a  patented  article. 

Constitutionality.— This  section  does  not  contravene  the  provisions 
of  the  Constitution  of  the  United  States  (Art.  1,  Sec.  8),  which  secures 
to  a  patentee  for  a  limited  time  "the  full  and  exclusive  right  and  liberty 
of  making,  using  and  vending  to  others  to  be  used,"  his  invention  or 
discovery,  or  of  the  Acts  of  Congress  passed  in  pursuance  thereof  (5  U.  S. 
Statutes  at  Large,  117).  The  said  act  does  not  operate  as  a  la\\'iul  re- 
straint upon  the  right  of  sale  conferred  upon  the  patentee  by  acts  of 
Congress. 

Herdic  v.  Roessler,  109  N.  Y.  127;  Hankey  v.  Downet,  116  Ind.  58; 
1  L.  R.  A.  447;  Bohn  v.  Brown,  101  Ky.  354;  41  S.  W.  273;  State  v.  Cook, 
64  S.  W.  (Tenn.)  720;  62  L.  R.  A.  174;  Allen  v.  Reiley,  203  U.  S.  347,  358; 
Benton  v.  Sikyta,  84  Neb.  808;  Quiggle  v.  Herman,  131  Wis.  379. 


NOTES   GIVEN    FOR   PATENT   RIGHTS,   ETC.  369 

Kniss  V.  Holbrook  et  al.  (Ind.  App.)  40  N.  E.  1118;  New  v.  Walker 
108  Ind.  365,  9  N.  E.  386,  58  Am.  Rep.  40;  Tescher  v.  Merea,  118  Ind. 
586,  21  N.  E.  316;  Sandage  v.  Studabaker  Bros.,  142  Ind.  148,  41  N.  E. 
380,  34  L.  R.  A.  363,  51  Am.  St.  Rep.  165;  Tredick  v.  Walters,  81  Kan. 
828,  106  Pac.  1067;  Pinney  v.  Bank,  68  Kan.  223,  75  Pac.  119,  1  Ann 
Cas.  331;  Id.,  70  Kan.  879,  78  Pac.  151;  Nyhart  v.  Kubach,  76  Kan.  154, 
90  Pac.  796;  Bolte  v.  Sparks,  85  Kan.  13,  116  Pac.  224;  Ensign  &  Co.  v. 
Coffelt,  102  Ark.  568,  145  S.  W.  231;  Allen  v.  Riley,  203  U.  S.  347,  27  Sup. 
Ct.  95,  51  L.  Ed.  216,  8  Ann.  Cas.  137;  Woods  v.  Carl,  203  U.  S.  358,  27 
Sup.  Ct.  99,  51  L.  Ed.  219;  Ozan  Lumb.  Co.  v.  Bank,  207  U.  S.  251,  28 
Sup.  Ct.  89,  52  L.  Ed.  195;  Winchester  Electric  Light  Co.  v.  Veal,  145 
Ind.  506,  41  N.  E.  334,  44  N.  E.  353. 

This  section  does  not  apply  to  notes  given  for  articles  manufactured 
imder  a  patent,  or  for  the  purchase  of  territory  for  the  sale  of  a  patented 
article. 

State  Bank  v.  Jones,  58  N.  E.  (Ind.)  852;  Hankey  v.  Downey,  116 
Ind.  118. 

The  penal  law  in  the  State  of  New  York  makes  it  a  misdemeanor 
for  any  person  knowingly  to  take  such  note  without  having  the  words 
"given  for  a  patent  right."  Sec.  1520  Penal  Law.  A  statute  making  it 
a  crime  to  take  promissory  notes  in  a  prohibited  transaction,  does  not 
make  the  notes  void  in  the  hands  of  innocent  purchasers,  although  the 
person  who  violates  the  statute  commits  a  crime. 

Anderson  v.  Etter,  102  Ind.  115;  Glenn  v.  Farmers'  Bank,  70  N.  C. 
191;  Palmer  v.  Minar,  8  Hun.  342;  Cook  v.  Weirman,  51  Iowa  561. 

A  promissory  note,  executed  in  a  transaction  forbidden  by  statute, 
is  at  least  illegal  as  between  the  parties  and  those  who  have  knowledge 
that  the  law  was  violated.  It  is  an  elementary  rule  that  what  the  law 
prohibits,  under  a  penalty,  is  illegal,  and  it  cannot,  therefore,  be  the 
foundation  of  a  right  as  between  the  immediate  parties. 

Wilson  V.  Joseph,  107  Ind.  490;  New  v.  Walker,  108  Ind.  369. 

§  331.  Negotiable  instruments  given  for  a  speculative 
consideration.  If  the  consideration  of  a  promissory  note  or 
other  negotiable  instrument  consists  in  whole  or  in  part  of 
the  purchase  price  of  any  farm  product,  at  a  price  greater  by 
at  least  four  times  than  the  fair  market  value  of  the  same 
product  at  the  time  in  the  locaHty,  or  of  the  membership  and 
rights  in  an  association,  company  or  combination  to  produce 
or  sell  any  farm  product  at  a  fictitious  rate,  or  of  a  contract  or 
bond  to  purchase  or  sell  any  farm  product  at  a  price  greater 


370  NEGOTIABLE   INSTRUMENTS   LAW 

by  four  times  than  the  market  value  of  the  same  product  at 
the  time  in  the  locaHty,  the  words,  "given  for  a  speculative 
consideration,"  or  other  words  clearly  showing  the  nature  of 
the  consideration  must  be  prominently  and  legibly  written 
or  printed  on  the  face  of  such  note  or  instrument  above  the 
signature  thereof;  and  such  note  or  instrument,  in  the  hands  of 
any  purchaser  or  holder,  is  subject  to  the  same  defenses  as  in 
the  hands  of  the  original  owner  or  holder. 
See  note  Sec.  96. 

§  332.  How  negotiable  bonds  are  made  non-negotiable. 

The  owner  or  holder  of  any  corporate  or  municipal  bond  or 
obligation  (except  such  as  are  designated  to  circulate  as  money, 
payable  to  bearer),  heretofore  or  hereafter  issued  in  and  payable 
in  this  state,  but  not  registered  in  pursuance  of  any  state  law, 
may  make  such  bond  or  obligation,  or  the  interest  coupon 
accompanying  the  same,  non-negotiable,  by  subscribing  his 
name  to  a  statement  indorsed  thereon,  that  such  bond,  obliga- 
tion or  coupon  is  his  property ;  and  thereon  the  principal  sum 
therein  mentioned  is  payable  only  to  such  owner  or  holder, 
or  his  legal  representatives  or  assigns,  unless  such  bond, 
obligation  or  coupon  be  transferred  by  indorsement  in  blank, 
or  payable  to  bearer,  or  to  order,  with  the  addition  of  the 
assignor's  place  of  residence. 


LAWS  repealed;  when  to  take  effect  371 

ARTICLE  20 

Laws  Repealed ;  When  to  Take  Effect 

Section  340.  Laws  repealed. 

341.  When  to  take  effect. 

§  340.  Laws  repealed.  Of  the  laws  enumerated  in  the 
schedule  hereto  annexed,  that  portion  specified  in  the  last 
column  is  hereby  repealed. 

Variant. — The  date  in  the  above  section  refers  to  the  statute  of  the 
State  of  New  York,  and  of  course  the  date  as  to  the  other  states  is  that  on 
which  the  law  went  into  effect. 

§  341.  When  to  take  effect.  This  chapter  shall  take 
effect  immediately. 

Schedule  of  Laws  Repealed. 

Revised  Statutes.  .  .  .Part  2,  chapter  4,  title  2, All 

Laws  of  Chapter  Section 

1788 33 All 

1794 48 All 

1801 44 All 

1819 34 All 

1823 216 All 

1826 17 All 

1828 20 15,  H  30  (2d  meet.) 

1828 20 I,  nil   51.   272,   393,   460   (2d 

meet.) 

1835 141 All 

1857 416 All 

1865 309 All 

1870 438 All 

1871 84 All 

1873 595 All 

1877 65 All 


372  NEGOTIABLE   INSTRUMENTS   LAW 

1887 461 All 

1888 229 All 

1891 262 All 

1894 607 All 

1897 612  All 

1897 613 2,3 

1898 336 AH 

1904 287 All 


Index  373 


INDEX 

(References  are  to  pages) 
ACCEPTANCE 

By  separate  instrument 306 

Duty  of  holder  where  bill  not  accepted 320 

Effect  of 300 

How  made. 303 

Holder  entitled  to  on  face  of  bill 306 

Kinds  of 311 

Meaning  of 2,  188 

Notice  of  non-payment  where  refused 273 

Of  incomplete  bill 310 

Of  note  payable  at  bank 238 

Omission  to  give  notice  of  non-acceptance 273 

Rights  of  parties  as  to  qualified 313 

Time  allowed  drawee  to  accept 309 

To  be  made  by  drawee  or  agent 304 

What  constitutes  general 312 

What  constitutes  qualified 312 

When  bill  dishonored  for  non-acceptance 319 

When  presentment  for  must  be  made 314 

When  promise  equivalent  to 307 

ACCEPTOR 

Admits  authority  to  draw  bill 188 

Admits  capacity  of  corporation 188 

Admits  capacity  of  infants 188 

Admits  existence  of  drawer 188 

Admits  genuineness  of  drawer's  signature 188 

Has  right  to  see  bill 224 

Liability  of 188 

Not  presumed  to  know  handwriting  in  body  of  the  bill 188 

Order  of  liability  of 205 

Payment  by,  of  bills  drawn  in  sets 340 

ACCEPTANCE  FOR  HONOR 

Agreement  of 334 

Example  of 337 

How  made 333 

Liability  of  acceptor  for  honor 333 

Presentment  for  payment 335 

Protest  of  a  bill  accepted  for  honor 334 

When  bill  may  be 332 

When  deemed  for  drawer 333 

When  may  be 333 

ACCOMMODATION  INSTRUMENTS 

Corporation  paper 97 

Executed  by  agent 99 

No  consideration  necessary  in  accommodation  note 94 


374  Index 

{References  are  to  pages) 

ACCOMMODATION  PARTIES 

Burden  of  proof 99 

Indorser 198,  245 

Liability  of 93,  100 

Liability  of  maker 5,  94,  100 

Married  woman  as 99 

Parol  evidence  as  to 100 

Partners  as 96 

Where  instrument  paid  by 284 

ACCOUNT 

Assignment  of 349 

"Either  or  survivor"  form  of 12 

Failure  to  examine 288 

ACTION 

By  holder 129 

Includes  counter-claim  and  set-off 2 

Restrictive  indorsement  confers  right  to  bring 1 14 

ADMINISTRATOR 

See  Agent  and  Executor. 

AGENT 

See,  Corporation,  authority  of  officers. 

Accommodation  paper  executed  by 99 

Bank  as;  for  payee 134 

Bank  not 238 

Draft ;  drawn  by 302 

Exceeding  authority;  liability  of  principal 79 

Fraud  by 65,  76 

Indorsement  by 123 

Indorsement  by  administrator  or  executor 68,  204 

Liability  as  indorser 210 

Liability  of  person  signing  as 68 

May  give  notice  of  dishonor 247,  248 

Notice  of  protest  may  be  served  on 253 

Payment  of  personal  debts  with  trust  funds 151,  162 

Power  of  attorney  for 67 

Signature  by,  authority;  how  shown 61,  154 

Trustee  as  agent 71 

ALTERATION 

Alleging 365 

Bank  when  not  responsible  for 288 

By  striking  out  name  of  payee 203 

Cancels  the  instnmient 278,  291 

EfTect  of;  where  instnmient  complete 41,  287,  293 

Filling  blanks;  not  an. 291,  292 

Holder  in  due  course,  rights  of 292 

Immaterial  no  effect 294 

Of  amount 289,  293 

Of  date 292 


Index  375 

{References  are  to  pages) 

ALTERATION— Continued 

Of  nimiber  of  parties 294 

Of  place 293 

What  constitutes  material 291,  292,  294 

When  presumed  before  execution 287 

When  depositor  estopped  from  alleging 365 

Without  consent  of  indorser 199 

AMBIGUOUS  INSTRUMENTS 

Parol  evidence  as  to 60,  243 

AMOUNT 

Alteration  of 43,  289,  293 

Certainty  as  to;  what  constitutes 18 

When  ambiguous 55,  57 

When  may  be  filled  in 43 

ANTECEDENT  DEBT 

Constitutes  consideration 87,  88 

ANTEDATED 

Does  not  make  instrument  invalid 40 

ASSIGNMENT 

Assignment  of  non-negotiable  note 202 

Bill  does  not  operate  as 298 

Subject  to  defenses 106 

Transfer  by 192,  193,  194 

When  check  does  not  operate  as  an 300 

When  check  operates  as  an 364 

Without  indorsement 106 

ASSUMED  NAME 

See,  Trade  Name. 

ATTORNEY  FEE 

Does  not  effect  the  negotiability 19 

BANK 

See  Savings  Bank. 

Acceptance  where  note  payable  at 238 

Agent  of  payee  for  collection 134 

Corporation  opening  an  account  with 160 

Liability  as  to  altered  instruments 290 

Liability  as  to  fraud  of  agents 76 

Liability  on  forged  checks 365 

Not  agent 238 

Order  of  liability  on  certified  check 205 

Payee  has  no  cause  of  action  against 365 

Presentment  where  instrument  payable  at 226,  237 

Relation  with  depositor 364 

When  holder  for  value 133 

What  is 2 

When  not  responsible  for  alterations 288 


376  Index 

{References  are  to  pages) 

BANKING  HOUSES 

Presentment  of  payment 220,  233 

What  are 226,  227 

BEARER 

Indorsement  of  instrument  payable  to 119 

Payable  to  cash  same  as 38 

To  be  negotiable  payable  to  or  order 9 

When  a  fictitious  person 37 ,  38 

When  indorsed  in  blank;  payable  to 120 

When  payable  to 37 

Who  is 2 

BILL 

Means  bill  of  exchange 2 

BILLS  IN  SETS 

Acceptance  of 340 

Constitute  one  bill 339 

Effect  of  discharging  one  of  a  set 340 

Liability  of  holder 340 

Payment  by  acceptor  of 340 

Rights  of  holder  where  different  parts  are  negotiated 340 

BILL  OF  EXCHANGE 

See  Acceptance. 

Acceptance  of;  incomplete 310 

Acceptance  of;  how  made 303 

Addressed  to  more  than  one  drawee 300 

Complaint  against  maker  of 190 

Damages  recovered  by  payee 301 

Damages  recovered  by  payee  on 322 

Defined 245 

Distinction  between  and  an  order 300 

Holder  entitled  to  acceptance  on  face 306 

In  effect  a  promissory  note 184 

Inland  and  foreign 301 

Liability  of  drawee  retaining 309 

Negotiable  before  acceptance 305 

Not  assignment  of  funds  in  hands  of  drawee 298 

Promise  to  accept 307 

Time  allowed  drawee  to  accept 309 

When  a  check 354 

When  amounts  to  an  assignment 299 

When  may  be  treated  as  promissory  note 301,  304 

BLANKS 

Authority  to  fill 41,  44 

Distinction  between  filling  and  altering 43 

Inserting  wrong  date 41 


Index  377 

{References  are  to  pages) 

BLANKS— Continued 

Liability  of  holder  in  due  course 43,  44 

Liability  of  party  who  has  indorsed 42 

Necessary  to  deliver 41 

No  right  to  supply  signature 45 

Space  in  completed  instrument 41 

True  date  to  be  inserted 46 

When  improperly  filled 41 

When  may  be  filled 41,  290 

BONDS 

Negotiable,  how  made,  non-negotiable 370 

BROKER 

See  Agent. 

Liability  of 210 

BURDEN  OF  PROOF 

As  to  altered  instruments 291 

As  to  cancellation 286 

As  to  consideration 86 

As  to  holder  in  due  course 173,  174 

As  to  payment  on  maker 277 

As  to  notice  of  defect 166 

As  to  notice  of  dishonor 245 

On  holder  to  prove  presentment 215,  219 

Where  fraud  or  duress  is  alleged 147,  174,  177 

When  title  defective 172 

CANCELLATION 

Burden  of  proof 287 

Instrument  discharged  by 286 

CAPACITY 

Acceptance  of  bill  an  admission  of 188 

Warranty  by  indorser 201 

CASH 

Instnmient  payable  to  "cash"  is  payable  to  bearer SS 

Payable  in  cash  or  merchandise  negotiable 30 

CASHIER 

Check '353 

Effect  of  instnmient  drawn  to 122 

Rule  of  agency  applies  to 61 

CERTAINTY 

Of  time 24,27,28 

CERTIFICATE  OF  DEPOSIT 

Contains  elements  of  promissory  note 351 

Form  of 7,  350 

When  negotiable l'^ 


378  Index 

(References  are  to  pages) 

CERTIFICATION 

Effect  of 358 

By  mistake 360,  363 

Not  a  demand  for  payment 214 

Of  post-dated  check 35^ 

Of  raised  check 359 

Stopping  payment  certified  check 359 

To  be  in  writing 360 

Where  drawer  procvires 361 

Where  holder  procures 361 

Where  payee  procures 361 

CHECK 

See  Certification. 
Alteration  of;  see  alteration. 

Bill  of  exchange  is,  when 354 

Bond  on  lost 331 

Certification;  see  certification. 

Defined 351 

Does  not  operate  as  assignment  of  funds 300 

Figures  on;  mere  memorandum 57 

Indorsement;  when  payable  to  bearer 1 15 

Liability  on  delivery  to  wrong  person 186 

Lost;  presentment  of 219 

Memorandum'  on;  effect  of 354 

Mutilated 186 

Order  of  liability  on  certified 205 

Payable  on  demand 351,  355 

Payment  by 355 

Payment;  what  constitutes 239,  242 

Recovery  on  forged 365 

Revoked  on  drawer's  death 54,  241 

Stolen;  liability  of  drawer 185 

Stopping  payment  of 240,  241 

Stopping  payment  of  certified 359 

Time  to  be  presented 355,  356 

When  operates  as  assignment 364 

CLEARING  HOUSE 

Pa}Tnent  through 277,  357 

COLLATERAL  NOTES 

Form  of 346,  347 

Guaranty  of 348 

COLLATERAL  SECURITIES 

Sale  of 350 


Index  379 

{References  are  to  pages) 

COLLECTION 

Bank  agent  of  payee  for 134 

Indorsement  for 113,118 

COMPLAINT 

Against  drawer  and  indorser 187 

Against  maker 182 

Against  maker  and  indorser 183 

Against  maker  bill  of  exchange 190 

By  accommodation  maker 182 

CONDITIONAL  INDORSEMENT 

Example  of •  • HO 

Party  required  to  pay  may  discharge  the  condition 118 

CONFLICT  OF  LAWS 

VaHdity  of  instnmient  governed  by  laws  where  made 315,  322 

CONSIDERATION 

See  Value. 

Absence  or  failure  of 88 

Antecedent  debt  constitutes 87,  88 

Antecedent  debt  is 87 

Burden  of  proof  as  to 86 

Effect  of  want  of 92 

Instruments  given  for  speculative 369 

Not  necessary  on  part  of  holder  to  discharge 277,  280 

Presumption  of 84 

What  constitutes 87 

What  is  an  admission  of 17,  284 

CONSTRUCTION 

Where  instrument  is  ambiguous 55 

CONTINGENCY 

Instrument  payable  on;  not  negotiable 24,  28 

CORPORATION 

See  Agent. 

Acceptor  admits  capacity  to  draw 188 

Accommodation  indorsement  by 99 

As  accommodation  party 97 

As  to  capacity  and  powers  of  officers  of 99 

Authority  of  officers  of 161,  180 

Authority  of  officers 62,  64 

Effect  of  indorsement  by 74 

Form  of  resolution  with  bank 160 

Indorsement  of  note  of 140 

Liability  as  maker 180 


380  Index 

{References  are  to  pages) 

CORPORATION— Continued 

Liability  of  officer  as  indorser 208 

Not,  disclosed  as  maker 73 

Pa\Tnent  of  personal  debts  by  officer  with  corporate  funds 

157,158,161,171 

When  not  disclosed 72,  73 

COSTS  OF  COLLECTION 

Pro\'ision  for i^ 

DATE 

Alteration  of ■ 292 

Ante-dated  and  post-dated  not  invalid 39 

Change  of ^31 

Omission  of 30 

Omission  of;  presumption 55 

Presimiption  as  to 39,  125 

Presumptive  evidence  of  time  of  issue 31 

Presumed  to  be  made  when  dated  may  be  post-dated 40 

When  may  be  inserted 40,  46 

Where  wrong 40 

DAY 

See  Holiday,  Satiu-day,  Simday. 

DAYS  OF  GRACE 

Abolished 235 

DEATH 

Of  indorser  where  notice  of  dishonor  to  be  sent 244 

Note  payable  upon  negotiable 27 

Notice  of  dishonor  where  party  is 253 

Presentment  when  principal  debtor  is 227,  357 

Presentment  when  drawee  is 317,  319 

Renunciation ;  effect  of 285 

Revokes  drawer's  check 54,  241,  352 

DEFECT 

What  constitutes  notice  of 148 

DEFENSES 

When  subject  to  original 1 '  ^ 

DEFINITIONS 

Of  tenns  used  in  act 2 

DELAY 

In  giving  notice  of  dishonor ^  •_    ^'A^ 

In  making  presentment 229,  335 


Index  381 

{References  are  to  pages) 

DELIVERY 

A  question  of  fact 3 

By  mistake 53 

Conditional 50,  53 

Of  incomplete  instrument 47 

Liability  of  indorsee  when  negotiated  by 206 

Meaning  of 2 

Necessity  of 49,  103 

No  inception  until 39 

Person  paying,  entitled  to 223 

Stolen  or  lost  before 49 

To  impostor  or  wrong  person 186 

Warranty  by 199 

When  effectual 48 

DEMAND 

By  letter 141,  214 

By  telephone 224 

On  joint  makers 227 

Must  be  presented  on  date  due  where  not  payable  on 215 

Necessary  to  charge  drawer  or  indorser 213 

On  partners 255 

Payable  on 9,  213 

Promissory  note  payable  on 141 

Suit  sufficient  demand ^^,  141 

When  pa^'^able  upon 32,  237 

DETERMINABLE  FUTURE  TIME 

Instrument  must  be  payable  on 9 

What  constitutes 24 

DISCHARGE  OF  INSTRUMENT 

Accommodation  party  not  discharged  by  extension  granted  in- 
dorser   279 

By  cancellation 275,  286 

Consideration  to  holder  not  necessary 277 

How  discharged 275 

Payment  by  indorser 276 

Renunciation  by  holder 285 

Rights  of  parties  who 283 

When  holder  person  primarily  liable 276 

When  persons  secondarily  liable  are 279 

DISCHARGE  OF  PARTY  SECONDARILY  LIABLE 

By  agreement  binding  on  holder 281 

By  cancellation 280 

By  discharge  of  instrument 280 

By  discharge  of  prior  parties 280 

By  extension  of  time 281 


382  Index 

{References  are  to  pages) 

DISCHARGE  OF  PARTY  SECONDARILY  LIABLE— Continued 

By  extension  of  time  to  plead  ^-ill  not 282 

By  release  of  one  of  several  and  joint  makers 281 

By  release  of  principal  debtor 281 

By  tender  by  prior  party 280 

Mere  indulgence  not  sufficient  to 282 

DISHONOR 

By  acceptor  for  honor 335 

By  non-pa^TTient 233,  318 

Liability  of  person  secondarily  liable 233 

When  a  bill  is  dishonored 319 

DRAFT 

By  agent 302 

Defined 298 

DRAWEE 

Bill  may  be  addressed  to  two  or  more 300 

Liability  of,  retaining  bill  of  exchange 309 

Time  allowed  to  accept  bill  of  exchange 309 

To  be  named  with  reasonable  certainty 10 

When  dead,  presentment  how  made 317 

DRAWER 

Acceptance  of  honor  of 333 

Acceptor  admits  existence  of  payee 184 

Admission  of 184 

Complaint  against;  form  of 186 

Complaint  by  holder  against 186 

Complaint  by  payee  again&t 186 

Death  of  revokes  check 54,  241 

Discharged;  upon  certification 358 

Liability  of 184 

Liability  as  to  stolen  checks 185 

Liability  of;  where  bill  dishonored  for  non-acceptance 184 

Notice  of  dishonor  to  be  given  to 244 

Presentment  necessary  to  charge 212 

Presentment  necessary  to  hold 355 

Right  of  recourse  to 233 

To  be  indicated  vnth  reasonable  certainty 10 

When  notice  of  protest  need  not  be  given  to 27 1 

DUE  COURSE 

See  Holder  in  Due  Course. 

What  constitutes  pa^-ment  in 242 

DUE  DILIGENCE 

What  constitutes 230,  356 

When  question  of  law 232 


Index  383 

{References  are  to  pages) 

DURESS 

See  Fraud. 

Instrument  obtained  by;  defective 144,  145 

Parol  evidence  admissible  to  prove 147 

ELECTION 

Holder  right  of 30 

ESTOPPEL 

As  to  forgery 81,  365 

As  to  previous  acts 99 

Of  maker 176 

EVIDENCE 

As  to  agreement  for  non-negotiation 103 

As  to  fraud  and  duress 147 

As  to  liability  of  parties 195,  196 

%   Contract  of  indorsement  cannot  be  varied  by  parol 205 

Effect  of  blank Ill 

Intention  of  indorsers  may  be  shown  by 209 

Of  indorser 244 

Negligence  in  signing  instrument 177 

Possession  of  instrument 279 

When  ambiguity  as  to  indorsement 118 

Where  instrument  ambiguous 60,  243 

EXECUTOR 

See  Agent. 

Check  payable  to 152,  155,  156 

Indorsement  by 204 

Liability  as  indorser 123 

Paper  of;  notice  to  bank 154,  164,  165 

Signattire  of;  notice  to  purchaser 138 

EXCHANGE 

Provision  for 19 

EXHIBITION  OF  INSTRUMENT 

Must  be 224 

Payment  without  when;  insufficient 225 

When  necessary 224 

EXTENSION 

Effect  of,  on  surety 179 

FICTITIOUS  PERSON 

Drawee  in  bill  of  exchange 301 

Notice  of  protest  to 272 

Payee;  when  drawer  estopped  to  allege 184 

Presentment  for  acceptance  excused  when  payee  is 319 


384  Index 

{References  are  to  pages) 

FICTITIOUS  PERSON— Continued 

Person  fraudulently  representing  another 79 

Presentment  may  be  dispensed  with 230 

When  payable  to  bearer 37,79 

When  payable  to  order  of 38 

FIGURES 

Mere  memorandum 239 

Where  discrepancy  with  writing 56 

FISCAL  OFFICER 

Instrument  payable  to 122 

Liability  as  indorser 208 

FOREIGN  BILL 

Defined 301 

FOREIGN  LANGUAGE 

May  be  written  in 39 

FORGED  SIGNATURE 

As  to  a  bona  fide  holder 189 

Bank  prestmied  to  know 288 

Effect  of 76 

Estoppel 81 

Of  drawer  and  payee 38,  78,  189 

Of  maker,  does  not  discharge  indorser 202 

Liability  of  savings  bank  on 80 

Recovery  on  forged  checks 365 

FORM 

And  interpretation 9 

Need  not  follow  statute 39 

FORMS 

Assignment  of  account 349 

Bond  on  lost  check ^^ 

Bond  on  lost  note 329 

Certificate  of  deposit 350 

Certificate  of  protest 325 

Check 352 

Complaint  against  acceptor,  maker  of  Bill  of  Exchange 190 

Complaint  against  maker  and  indorser 183 

Complaint  against  maker  of  note 182 

Complaint  by  accommodation  maker 182 

Complaint  by  holder  against  indorser 187 

Complaint  by  payee  against  drawer 186 

Either  or  survivor  account 12 

Guaranty  of  collateral  note 348 


Index  385 

{References  are  to  pages) 

FORM  S— Continued 

Note 344 

Note  with  deposit  of  collateral 346,  347 

Note  with  transfer  of  account 348 

Notice  of  protest 326 

Power  of  attorney 67 

Power  of  attorney,  revocation  of 68 

Resolution  of  corporation  with  bank 160 

Stopping  payment  on  check 241 

FRAUD 

See  Duress. 

As  to  character  of  instrument 145 

Burden  of  proof  as  to 174,  200 

Evidence  admissible  to  prove 147 

Holder  in  due  course 177 

Instrument  obtained  by;  defective 144 

Ratification  of 79 

Rights  of  holder  to  paper  obtained  by 150 

What  transferee  must  show 171 

GENUINENESS 

Acceptor  admits  signature  of  drawer 188 

By  implication 200 

No  warranty  when  by  delivery  only 201 

Warranty  of  where  negotiation 201 

When  warranty  of,  not  implied 200 

GOOD  FAITH 

What  constitutes  on  part  of  holder 134 

GOODS  AND  MERCHANDISE 

Instnmient  payable  in 30 

GUARANTOR 

Not  entitled  to  notice  of  dishonor 244 

When  liability  becomes  fixed 244 

When  person  becomes 192 

GUARANTY 

Assignment  not  a 193 

Form  of 108,  235,  348 

Indorsement  by 108 

Indorsement  implies  a 203 

Meaning  of 234 

Where  instrument  dishonored 244,  245 

GUARDIAN 

See  Agent,  Executor. 


386  Index 

{References  are  to  pages) 

HOLDER 

Effect  of  notice  of  dishonor  given  on  behalf  of 248 

Certifying  check  discharges  drawer 362 

Duty  of;  where  bill  not  accepted 320 

Good  faith  on  part  of 134 

Liability  of  indorsing  bills  in  sets 340 

May  receive  payment 1 29 

May  sue  any  party 170 

May  sue  in  own  name 1 29 

Meaning  of 2,  129 

Presentment  to  be  made  by 219 

Renunciation  by 285 

Rights  of 129,  170 

Rights  of;  to  stolen  paper 169 

HOLDER  FOR  VALUE 

Burden  of  proof 99 

Indorsee  prestmied  to  be 134 

Indorsee  taken  for  security  is 132 

Rights  of 148 

What  constitutes 89 

HOLDER  IN  DUE  COURSE 

After  riotice  of  infirmity 142 

As  to  purchaser  for  less  than  face  value 150 

Burden  of  proof  as  to 173 

Fraud  not  a  defense  against  a 177 

Payee  as 136 

Presumption  of 127 

Renunciation  does  not  effect 285 

Rights  of 129,  166 

Rights  under  altered  instrument 292 

Sectibn  applied  to 106 

What  constitutes 130 

When  a  person  not  deemed 141 

Who  deemed 54,  172 

With  knowledge  of  failure  of  consideration 140 

HOLIDAY 

See  Saturday,  Sunday. 

Legal  holidays  in  New  York 6 

Time,  how  computed  when  laSt  day 6 

When  instrument  falls  due  on 235,  237 

INCOMPLETE  INSTRUMENTS 

See  Blanks. 

Not  delivered 45,  47,  49 

Stolen 49 

Who  liable  on 47 


Index  387 

{References  are  to  pages) 

INDORSEMENT 

Accommodation  by  corporation 99 

Blank;  changed  to  special 1 12 

Blank;  example  of 1 10 

By  agent;  liability  of 210 

By  execu;tor 122,  204 

By  fiscal  officer 122 

By  guaranty 108 

By  mark  or  pencil  sufficient 104 

By  party  of  same  name 123 

Conditional 118 

Conditional ;  example  of 1 10 

Effect  of,  by  infant  or  corporation 74 

Effect  of  restrictive  indorsement 114 

Failure  to  allege  indorsement 343 

For  collection  and  deposit 1 14 

In  a  representative  capacity 123 

In  blank Ill 

In  blank;  meaning  of 109 

Indorsement  of  instrument  payable  to  bearer 119 

Kinds  of 109,  110 

Liability  of  partners 197 

Meaning  of 3,  202,  203 

Must  be  of  the  entire  instrument 108 

Not  necessary  when  payable  to  order  how  made 103 

Of  whole  instrument 108 

Payable  to  either  of  two 121 

Payable  to  two  or  more 120 

Presumption  as  to  time  of 124 

Place  of;  presumption 125 

Qualified 115 

Qualified;  example  of 1 10 

Restrictive ;  effect  of 1 14,  1 16 

Restrictive ;  example  of Ill,  115 

Requisites  of 106 

Striking  out 126 

To  avoid  guaranty  by 116 

Transfer  without 1 26 

Warranty  by 199,  272 

With  rubber  stamp 11,  191 

When  restrictive 112 

Where  name  is  wrongly  designated  or  misspelled 123 

Without  recourse 115 


INDORSEE 

Agent  of  indorser 112 

Notice  of  dishonor  to  be  given  to 244 

Rights  of 114 


388  Index 

(References  are  to  pages) 

INDORSER 

Accommodation 198 

Complaint  against;  form  of 183 

Delay  in  presentment  discharges 356 

Intention  may  be  shown  by  parol 209 

Liability  of  accommodation 95 

Liability  contingent  upon  protest 176,  196 

Liability  on  demand  note 141 

Liability  of  corporation  as 208 

Liability  of  general 201,  273 

Liability  of  irregular 1 1*1 

Liability  of  where  negotiated  by  deUvery 206 

Not  a  surety  after  dishonor 234 

Order  of  HabiHty  of 205,  206 

Order  in  which  Hable 205,  206,  207 

Payment  by 276 

Payment  by  second 276,  284 

Presentment  necessary  to  charge 212 

Security  to  be  tendered  maker  to  hold 225 

When  name  of  only  descriptive 56 

When  notice  of  dishonor  need  not  be  given  to 272 

When  person  deemed 191 

When  presentment  not  necessary  to  charge 229 

INSTRUMENT 

See  Negotiable  Instruments. 

Ante-dated  and  post-dated 40 

Definition  of j 

Discharged;  how 275 

Drawee  to  be  named  on 10 

In  blank;  payable  to  bearer 37 

Incomplete • inc 

Indorsement  of;  must  be  entire 108 

Means  negotiable  instnmient 3 

Must  be  exhibited 223,  224,  225 

Need  not  follow  language  of  statute 39 

Notice  of  infirmity  in 142 

Omissions  not  affecting 30 

Payable  to  order  or  bearer 9 

Payable  in  money ^       9 

Requisites  of 9,  106 

Stolen  or  lost  before  delivery 49 

Subject  to  attachment 128 

Subject  to  attachment  and  sale 128 

Stmi  to  be  certain 9 

To  be  in  writing 9 

To  be  signed ? 

When  ambiguous ^^ 

When  prior  party  may  negotiate 128 

Where  payable ^15 


Index  389 
{References  are  to  pages) 

INFANT 

Acceptor  admits  capacity  to  draw 188 

Effect  of  indorsement  by 74 

INTEREST 

Conflict  of  laws 59 

Does  not  make  the  sum  uncertain 18 

Not  to  effect  negotiability 19 

Table  of  all  states 58 

When  date  omitted 55 

When  no  rate  mentioned 57 

INSANE  PERSON 

Acceptor  cannot  show  drawer  was 188 

Instrument  executed  by 165,  200 

ISSUE 

Meaning  of 3 

JOINT  ACCOUNT 

Form  on  opening 12 

JOINT  DEBTORS 

Presentment  to 228 

JOINT  PARTIES 

Joint  payees  indorsing 207 

When  jointly  and  severally  liable 56 

JUDGMENT  NOTES 

When  not  negotiable 29 

LAW  MERCHANT 

Rules  of  when  govern 7 

LIABILITY 

Of  acceptor 188 

Of  acceptor  for  honor 3?>Z 

Of  accommodation  party 93,  100 

Of  accommodation  indorser 95 

Of  administrators  or  executors  indorsers 123 

Of  agent  or  broker 210 

On  check  delivered  to  wrong  person 186 

Of  drawer 184 

Of  general  indorser 201 

Of  holder  indorsing  bills  in  sets 340 

Of  indorser  when  negotiated  by  delivery 206,  209 

Of  joint  makers 179 

On  lost  note 178 

Of  maker 176 

Of  officers  indorsing 123,  208 


390  Index 

{References  are  to  pages) 

LIABILITY— Continued 

Order  of 99,  205,  207 

Of  partners  indorsing  individually 197 

Presentment  necessary  to  charge  drawer  and  indorser 212 

Of  surety  signing  as  maker 179 

LIEN 

Person  having  deemed  holder  for  value 91 

Person  having  may  sue 91 

Person  having  may  recover 91 

Though  principal  debt  not  due 91 

LOST  INSTRUMENT 

Bond  on  lost  check 331 

Bond  on  lost  note 329 

Does  not  excuse  notice  of  dishonor 245 

Liability  on 178 

Protest  of 329 

MAIL 

As  to  notice  of  dishonor 258,  259 

Delay  in 230,  271 

Miscarriage  of 261 

Notice  of  dishonor  by 262 

MAKER 

Admission  of 176 

Burden  of  proof  on  to  show  payment 277 

Complaint  against;  form  of 182 

Demand  to  be  made  on  joint 227 

Estoppel  of 176 

Forged  signature  of 202 

Liability  of 176 

Liability  of  accommodation 94 

Liability  of  joint 179 

Order  of  liability  of 205 

Parol  evidence  to  show  capacity 60 

Pa>Tnent  to  own  order;  indorsement  of 35 

MATURITY 

Governed  by  law  of  place  where  payable 237 

On  holiday  rule  as  to 237 

Time  of 235 

MEMORANDUM 

Does  not  effect  negotiability 21,  23 

Effect  of  on  check 354 

Figures  on  check  are 57 

When  not  an  alteration 294 


Index  391 
{References  are  to  pages) 

MONEY 

As  to  what  constitutes 13 

Designation  of  particular  kind 30 

Election  of  holder;  in  lieu  of 29 

NAME 

Alteration  by  striking  out 203 

Holder  may  sue  in  own 129 

When  wrongly  designated 123 

NEGOTIABLE  INSTRUMENTS 

See  Instruments. 

Drawer  to  be  named 9 

Effect  of  inserting  memorandum 23 

Foreign  language;  written  in 39 

Form  of 9 

To  be  in  writing 9 

To  be  payable  to  order  or  bearer 9 

To  contain  an  unconditional  promise 9 

NEGOTIABILITY 

Bill  of  exchange  is,  before  acceptance 305 

Date ;  effect  of  on 27 

Meaning  of  term 10 

Mention  of  fund;  negotiability 22 

Of  instrument  imtil  restrictively  indorsed 125 

Provisions  not  effecting 28 

NEGOTIABLE  INSTRUMENTS  LAW 

Adoption;  date  of after  the  preface 

Courts  will  not  take  judicial  notice  of 2 

Short  title 2 

NEGOTL/VTION 

By  prior  party 128 

Dishonor  does  not  effect 234 

Of  bill,  time  of 217 

Of  instruments  payable  to  bearer 102 

Of  post-dated  instruments 40 

Release  of  drawer  and  indorsers  by  delay  in 315 

Rules  governing Art.  V 

What  constitutes 102 

When  prior  party  may  negotiate 128 

NOTE 

Acceptance  of  payable  at  bank 238 

Ambiguous  instrument  may  be  considered  a 55 

Bill  of  exchange  in  effect  a 184 

Bond  on 329 

Defined 342 


392  Index 

{References  are  to  pages) 

NOTE— Continued 

Form  of 344,  345 

Given  for  patent  rights  and  speculative  consideration 363 

Guaranty  of 348 

Lost,  does  not  excuse  notice  of  dishonor 245 

Lost;  HabiHty  on 178 

Made  and  dehvered  on  Sunday 345 

May  be  considered  a 55 

Negotiability  of 27 

Not  subject  to  gift 85 

Payment  by  indorser 276 

Payable  upon  death 27 

To" constitute  valid 27,  344 

Usurious,  see  Usiury. 

When  bill  of  exchange  treated  as 301,  304 

NOTICE  OF  DISHONOR 

By  bank,  to  whom  given 245 

By  whom  given 247 

Delay  in  giving,  how  excused 271 

Deposit  in  post-ofhce 262 

Effect  of  given  on  behalf  of  holder 248 

Effect  of  omission  to  non-payment 273 

Form  of  notice 250 

Given  by  agent 247 

Lost  note  does  not  excuse 245 

Notice  to  partners 254 

Notice  where  party  is  dead 253 

Pleadings  of 246 

Surety  not  entitled  to 5 

To  antecedent  party 262 

To  bankrupt 256 

To  persons  jointly  liable 256 

Time  in  which  notice  must  be  given 257 

To  whom  notice  may  be  given 253 

To  whom  notice  must  be  given 244 

Waiver  of  notice 266 

When  agent  may  give 248 

When  dispensed  with 270 

When  need  not  be  given  to  drawer 271 

When  indorser  is  dead 244 

When  notice  sufficient 249 

When  sender  deemed  to  have  given  due  notice 261 

When  parties  reside  in  different  places 259 

When  parties  reside  in  same  place 258 

Where  acceptance  is  refused 273 

Whom  affected  by  waiver 268 

Where  must  be  sent 263 

Where  given  by  party  entitled  thereto 248 


Index  393 

{References  are  to  pages) 

NOTICE  OF  INFIRMITY 

What  constitutes 148 

When  person  a  holder  in  due  course 142 

NOTING 327 

OMISSIONS 

Negotiable  character,  when  not  affecting 30 

ORDER 

Indorsement  not  necessary 35 

Instruments  payable  to 35 

Instruments  payable  to  order  of  drawer 35 

Instnmients  payable  to  order  of  maker 35 

Instnmients  payable  to  order  two  or  more 35 

Instruments  payable  to  order  one  or  more 35 

Payee  must  be  indicated 35 

To  be  payable  to  or  order 9 

When  payable  to 35 

OVERDRAFT 

Liability  on 238 

PARTICULAR  FUND 

Promise  unconditional  when  indicated 20 

PAROL  EVIDENCE 

See  Evidence. 

PARTICULAR  FUND 

Meaning  of 22 

PARTNERS 

Distinction  between  joint  makers  and 255 

Distinction  between  parties  jointly  liable  and  partners 256 

Liability  of 96 

Liability  of  indorsing  individually 197 

Notice  of  dishonor  to 254 

Partner  as  accommodation  party 96 

Payment  of  personal  debt  with  partnership  paper;  effect  of . .  . . 

161,163,  164 

Presentment  for  acceptance  to 317 

Presentment  to  persons  liable  as 228 

PATENT  RIGHTS 

Constitutionality  of  provision  relating  to 368 

Notes  given  for 368 


394  Index 

{References  are  to  pages) 

PAYEE 

Bank  failure  to  accept,  rights  of 365 

By  acceptance ;  admission  of 188 

Designation  of 35 

Entitled  to  surrender  of  instrument 276 

For  honor,  rights  of 338 

Holder  in  due  course 136 

When  more  than  one 36,  120,  121 

Where  name  wrongly  designated  or  misspelled 123 

PAYMENT 

By  acceptor  of  bills  drawn  in  sets 340 

By  alteration 278 

By  check  not  satisfaction  of  debt 355 

By  person  accommodated 275 

By  principal  debtor 276 

By  stranger 275 

By  surrendering  instrimient 277 

By  person  insolvent,  effect  of 280 

Checks  order  of 241 

Deposit  of  proceeds  of  note  to  account,  not 143 

Discharges  an  instrument 129,  275 

Distinguished  from  sale 276 

Form  of  notice  in  stopping 241 

In  due  course 242 

Of  check,  what  constitutes 239,  242 

Of  bill  in  set 340 

Overdraft 239 

Presentment  for 212 

Possession  of  instrmnent  evidence  of 279 

Stopping 240,  359 

Through  clearing  house 277 

What  constitutes  in  due  course 242 

PAYMENT  FOR  HONOR 

Declaration  before 337 

Effect  on  subsequent  parties 337,  238 

How  made 336 

Preference  of  parties 337 

Rights  of  payee  for  honor 338 

Where  holder  refuses  to  receive 338 

Who  may  make 336 

PENCIL 

Writing  may  be  made  with 4,11 

PERSON 

Meaning  of 3 


Index  395 

{References  are  to  pages) 

PLACE 

Alteration  of 293 

Of  indorsement;  presumption  of 125 

Of  payment  not  mentioned 223 

Of  presentment 221 

Of  protest 327 

Omission  to  specify 30 

What  is  for  presentment 220,  221 

When  may  be  filled  in 45 

PLEADINGS 

See  Forms. 

Allegation  as  to  bill  of  exchange  in  writing 306 

Allegation  "for  a  valuable  consideration" 343 

Alleging  making  of  instrument 130 

Failure  to  allege  indorsement 343 

In  notice  of  dishonor 246,  268 

In  notice  of  protest 270 

Presentment  and  demand  to  be  alleged 216,  219 

POST-DATED  INSTRUMENT 

Negotiable,  not  invalidated  by  reason  of 40 

POST  OFFICE 

Deposit  of  notice  of  dishonor  in 262,  263 

What  meant  by 259 

POWER  OF  ATTORNEY 

See  Agent. 

Form  of 67 

Revocation  of 68 

PRE-EXISTING  DEBT 

Constitutes  value 87 

PRESENTATION 

Necessary  to  hold  drawer 355 

Officer  of  corporation  as  indorser  entitled  to 215 

When  not  necessary 213 

When  Saturday  half  holiday 7 

PRESENTMENT  FOR  ACCEPTANCE 

Distinction  between  presentment  for  payment 315 

How  made 317 

On  what  days  may  be  made 318 

When  excused 319 

When  dishonored  by  non-acceptance 319 

When  it  must  be  made 314 

When  time  is  insufficient 318 

Where  failure  to  present  releases  drawer  and  indorser 315 


396  Index 

{References  are  to  pages) 

PRESENTMENT  FOR  PAYMENT 

After  death  of  drawer 357 

Burden  on  holder  to  hold  indorser 215 

Delay  in  making;  when  excused 230 

Distinction  between  presentment  for  acceptance 315 

Not  necessary  to  charge  person  primarily  liable 212 

Of  lost  instrument 219,  231 

Place  of 221 

The  rule  as  to  Saturday 237 

To  acceptor  for  honor 335 

To  be  alleged 216 

To  be  made  at  reasonable  hour 219 

To  joint  debtors 228 

To  person  liable  as  partners 228 

What  constitutes  sufficient 219 

When  payable  at  bank 226 

When  dispensed  with 231,  233 

When  falling  due  Sunday  or  hohday 234 

When  sufficient 224 

When  not  necessary  to  charge  drawer 229 

When  not  necessary  to  charge  indorser 229 

Where  not  payable  on  demand 131 

Where  principal  debtor  is  dead 227 

Within  what  time  check  must  be 355 

PRIMARILY  LIABLE 

Presentment  for  payment  not  necessary  to  charge 212 

Question  of  fact 5 

Who  is 5 

PRINCIPAL 

See  Agent. 

Power  of  attorney  of 67 

PRINTED  PROVISIONS 

Writing  governs  over 55 

PROMISSORY  NOTES 

See  Notes. 

PROTEST 

Applies  to  foreign  bills 269 

Before  maturity  where  acceptor  insolvent 328 

By  whom  made 326 

Certificate  of 325 

Delay  in  giving  notice  of 271 

Facts  to  be  stated  in  notice  of 251 

For  non-acceptance  and  non-payment 328 

How  made 323 


Index  397 

{References  are  to  pages) 

PROTEST— Continued 

Indorser's  liability  contingent  upon 196,  327 

In  what  cases  necessary 321 

Meaning  when  used  in  pleading 219 

Notice  of 326 

Notice  may  be  served  on  agent 253 

Object  of  notice  of 252 

Of  bill  accepted  for  honor 334 

Of  bill  of  exchange,  damages  recovered 301 

To  maker 274 

Waiver  of 269 

What  is 323 

When  dispensed  with 328 

When  must  be  made 274 

When  need  not  be  made 274 

When  notice  need  not  be  given  to  indorser 272 

When  notice  need  not  be  given  to  drawer 271 

When  notice  dispensed  with 270 

When  to  be  made 327 

Where  bill  is  lost  or  destroyed 329 

Where  made 327 

REASONABLE  DILIGENCE 

What  is 270 

REASONABLE  HOUR 

Presentment  to  be  made  at  a 219 

REASONABLE  TIME 

Burden  on  plaintiff  to  show 6,  46 

In  presentment  for  payment 217,  218 

Nature  of  instrument  in  determining 216 

Presentment  for  acceptance  to  be  in 315 

What  constitutes 6,  141,  356 

Where  instrument  payable  on  demand 140 

When  question  of  law  or  fact 6 

REFEREE  IN  CASE  OF  NEED 

Drawer  may  insert  name  of 302 

RENUNCIATION 

By  holder 285 

Effect  of 285 

Meaning  of 285 

To  be  in  writing 285 

REPRESENTATIVE  CAPACITY 

Sec  Agent. 


398  Index 

{Refer ences  are  to  pages) 

RESIDENCE 

Meaning  of  tenn 264 

Time  of  sending  notice  of  dishonor  to 254,  258 

SATURDAY 

Instruments  falling  due  on 214,  235 

Presentment  for  acceptance  on 318 

Presentment  when  half  holiday 7,  237 

Where  indorser  receives  notice  of  dishonor 263 

SAVINGS  BANKS 

Forged  instruments;  effect  of  on 80 

Liability  on  forged  instruments 366 

Order  on;  when  non-negotiable 18 

Pass  book  of;  non-negotiable 12 

When  order  on  not  negotiable 22 

SEAL 

Efifect  of;  on  corporation  paper 32 

Omission  of 30 

SECONDARILY  LIABLE 

Liability  of ;  when  instrument  dishonored 233 

When  discharged 279 

Where  instrument  paid  by  person 283 

Who  is 5 

SIGHT 

Instruments  payable  at  sight  are  payable  on  demand 32 

SIGNATURE 

See  Forged  Instruments. 

Absence  of;  not  authority  to  fill 45 

Banker  presumed  to  know 288,  299 

By  agent 61 

By  procuration;  efifect  of 74 

Forged;  efifect  of 76 

Full  name  not  necessary 11 

In  case  of  doubt  as  to  intention 55 

Liability  of  paying  on 80 

Place  of,  immaterial 11 

SPECULATIVE  CONSIDERATION 

Constitutionality  of  provision  relating  to 368 

Notes  given  for 368 

Instruments  given  for 369 

STATEMENT  OF  TRANSACTION 

Efifect  of 20 


Index  399 

{References  are  to  pages) 

STOLEN  INSTRUMENTS 

Before  delivery 49 

Liability  of  drawer 185 

Purchaser  in  good  faith  of 173 

Rights  of  holder  in  due  course 168,  169 

SUM  CERTAIN 

What  is 18 

SUNDAY 

See  Holiday. 

Note  made  on 345 

Time;  how  computed  when  last  day 6 

When  instrument  falls  due  on 234 

SURETY 

Bound  with  principal 5 

Indorser  without  consideration  becomes 95 

Liability  of  signing  as  maker 179 

Not  entitled  to  notice  of  dishonor 108 

Subrogated  to  rights  of  judgment  creditor 280 

TELEPHONE 

Demand  over 225 

TENDER 

Funds  to  meet  at  place  payable  is 212 

Persons  secondarily  liable  discharged  by 279 

Security  to  be ;  to  hold  indorser 2  25 

TIME 

See  Reasonable  Time. 

Allowed  drawer  to  accept  bill  of  exchange 309 

Determinable  future;  what  constitutes 24 

Depends  upon  intent 25 

How  computed 6,  237 

Indeterminate 16 

Indefinite 28,  29 

In  which  check  must  be  presented 355 

In  which  notice  of  dishonor  must  be  given 257 

Of  indorsement;  presumption  of 124 

Of  notice  of  dishonor  to  antecedent  party 262 

Of  maturity 235,  237 

Of  notice  of  dishonor  to  antecedent  parties 262 

Presentment  for  acceptance 318 

When  time  of  omitted 31 

TRADE  NAME 

Liability  of  person  signing  in 60 


400  Index 

{References  are  to  pages) 

TRUST  FUNDS 

See  Corporation,  Agent,  Executor. 

Notice  of 151 

TRUSTEE 

Calls  for  inquiry 153 

Liability  of;  see  Agent,  Executor. 

Negotiability  of  paper,  payable  to 36 

UNCONDITIONAL  PROMISE 

Necessary  to  be  negotiable 9,  343 

When  promise  is 20 

UNIFORMITY 

Courts  follow  the  intent  of  uniformity 2 

USURY 

Rights  of  holder  in  due  course 168 

Transfer  of  note ;  tainted  with 200 

Where  bank  discounts  paper  void  for 138 

VALUE 

See  Consideration. 

Consideration  presumed 84,  342 

Omission  to  specify 30,  3 1 

Payment  of  in  determining  bona  fides 174 

Pleading  of 343 

What  constitutes 87,  133 

WAIVER 

By  failiu"e  to  examine  account 288 

May  be  implied 232 

Of  notice  of  dishonor 266 

Of  presentment 230,  232 

Of  protest 269 

Whom  effected  by 268 

WARRANTY 

By  deliver}'  or  indorsement 199 

By  delivery  only 199,  201 

By  qualified  indorsement 1 16 

Express 200 

General  indorser  warrants 201 

Of  capacity  of  prior  parties 201 

Of  check  for  deposit 202 

Of  genuineness 199,  201,  202 

Of  validity 200,201 

One  who  sells  paper  implies 200,  202 

Signature  of  drawer 202 

To  whom  runs 201 

When  indorsed  "for  collection" 113,118 


Index  401 
{References  are  to  pages) 

WITHOUT  RECOURSE 

Does  not  effect  negotiability 116 

Form  of  indorsement  of 110,  115,  118 

Meaning  of 115 

Not  evidence  of  defect  of  title 116 

Purpose  of 116 

WRITING 

Acceptance  to  be  in 303 

Certification  of  check  to  be  in 360 

In  foreign  language 39 

Includes  print 10 

May  be  with  pencil  or  ink 4,  11 

Negotiable  instruments  to  be  in 9 

Prevails  when  in  conflict  with  print 55 

Renunciation  to  be  in 285 

Where  ambiguous 55 


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